Of new factories and we believe there’s still meaningful room for improvement there. Regarding Autopilot and AI, our vehicles are now driven over 0.5 billion miles with FSD beta, full self-driving beta, and that number is growing rapidly. We recently completed a 10,000 GPU cluster of H100s. We think we can probably bring it into operation faster than anyone’s ever brought that much compute per unit time into production, since training is the fundamental limiting factor on progress with full self-driving and vehicle autonomy. We’re also seeing significant promise with FSD version 12. This is the end-to-end AI where it’s photon count in, controls out. Really, you can think of it as there’s just a large bitstream coming in and a tiny bitstream going out, compressing reality into a very small set of outputs, which is actually kind of how humans work. The vast majority of human data input is optics from our eyes. And so, we are like the car, photons in, controls out with neural nets, just neural nets in the middle. So, interesting to think about that. We’ll continue to invest significantly in AI development as this is really the mass game changer. And I mean success in this regard in the long term, I think has the potential to make Tesla the most valuable company in the world by far. If you have fully autonomous cars at scale and fully autonomous humanoid robots that are truly useful, it’s not clear what the limit is. Regarding energy storage, we deployed 4 gigawatt hours of energy storage products in Q3. And as this business grows, the energy division is becoming our highest margin business. Energy and service now contribute over $0.5 billion to quarterly profit. The Cybertruck, I know a lot of people are excited about the Cybertruck. I am too. I’ve driven the car. It’s an amazing product. I do want to emphasize that there will be enormous challenges in reaching volume production with the Cybertruck and then in making a Cybertruck cash flow positive. This is simply normal for when you’ve got a product with a lot of new technology or any new vehicle, brand new vehicle program, but especially one that is as different and advanced as the Cybertruck, you will have problems proportionate to how many new things you’re trying to solve at scale. So, I just want to emphasize that while I think this is potentially our best product ever and I think it is our best product ever, it is going to require immense work to reach volume production and be cash flow positive at a price that people can afford. Often people do not understand what is truly hard. That’s why I say prototypes are easy, production is hard. People think it’s the idea, or you make a prototype, you design a car. And as soon as they’re designing a car, it’s just anyone can do it; it does require taste, it does require effort to design a prototype. But it’s difficult to go from a prototype to volume production; it’s like 10,000% harder to get to volume production than to make a prototype in the first place, and then it is even harder than that to reach positive cash flow. That is why there have not been new car startups that have been successful for 100 years apart from Tesla. So, I just want to temper expectations for Cybertruck. It’s a great product, but financially it will take, I don’t know, a year to 18 months before it is a significant positive cash flow contributor. I wish there was some way for that to be different, but that’s my best guess. The demand is off the charts. We have over 1 million people who’ve reserved the car. So it’s not a demand issue, but we have to make it, and we need to make it at a price that people can afford, which is insanely difficult. In conclusion, we continue to focus on ramping production while maintaining positive cash flow and we continue to expect to have around 1.8 million vehicle deliveries, as stated earlier this year. The Tesla AI team is, I think, one of the world’s best, and I think it is actually by far the world’s best when it comes to real world AI. I’ll say that again, Tesla has the best real world AI team on Earth, period, and it’s getting better. And lastly, I wanted to thank all of our employees who are making a lot of extra effort during uncertain times. Thank you very much for your hard work and the impact that you’re making.

Thank you very much, Elon. And our CFO, Vaibhav, has some opening remarks as well.

Thanks, Martin. Vehicle deliveries in Q3 outpaced production, and we had yet another record quarter of profitability in our energy business. Congratulations to the Tesla team for the continued focus on operational excellence as we navigate through a period of economic uncertainty, higher interest rates, and shifting consumer sentiment. As Elon mentioned, our Q3 operational and financial performance was impacted by planned downtimes for our factory upgrades. This was necessary to allow for further factory improvements and production rate increases. Despite such factory shutdowns, our cost per vehicle decreased to approximately $37,500. We saw sequential decreases in material cost and freight. Reducing the cost of our vehicles is our top priority. On the operating expenses front, R&D expenses continued to rise due to Cybertruck prototype builds and pilot production testing combined with spend on AI technologies like full self-driving, Optimus, and Dojo. We have and will continue to make investments in these areas, and hence our capital expenditure and R&D will continue to grow in the near term. However, our focus is to continue making investments through positive cash flow from operations. This year itself, we have generated operating cash flows of approximately $8.9 billion and free cash flows of approximately $2.3 billion. Our other businesses are becoming more prominent on a standalone basis with energy business leading the charge, primarily from the growth in Megapack deployments. Our services and other businesses on a year-on-year basis also continue to show positive momentum as we benefit from our growing fleet. As regards our pricing strategy, in addition to what we have shared before, I want to elaborate that most car buying happens with one or another form of financing, and hence we also view pricing in terms of monthly costs for the customer. And therefore, as interest costs in the U.S. have risen substantially, it has required us to adjust the price of our vehicles to keep the monthly cost in parity. We’ve tried to offset such adjustments via focus on reducing costs. However, there is an inherent lag in cost reductions, which in turn impacts margins. To that extent, we recently announced a partner vehicle leasing program in the U.S. whereby you can get a standard Model Y for as low as $399 a month. In conclusion, as we navigate through a challenging economic environment, we’re focused on reducing costs, maximizing delivery volumes, and continuing making investments in the future, in particular, AI and other next generation platforms. We believe this strategy positions us well for the long term. Once again, I would like to thank the Tesla team for their efforts in the last quarter.

Thank you very much. And now let’s go to investor questions. The first investor question comes from Craig. How many Cybertruck deliveries do you anticipate for 2024?

It’s challenging to make an accurate prediction at this time. As I mentioned earlier, the ramp-up is going to be very difficult, and there's no avoiding that. If we were simply to replicate existing vehicle designs, there are countless models that offer only slight variations in the combustion engine category, making it relatively easy. However, creating something groundbreaking and innovative like the Cybertruck is extremely challenging because there is nothing to replicate. You need to not only design the vehicle but also develop the production methods. Therefore, the more unexplored the area, the less certain the results. Regarding where we might end up, I estimate that we could produce around 250,000 Cybertrucks annually, but I don’t expect us to reach that output rate next year. I believe we will likely achieve it sometime in 2025. That’s my best estimate.

Thank you. The second question is, can you provide a progress update on the 4680 cell, particularly progress towards performance improvements and cost savings outlined on Battery Day? Thank you.

Sure thing, Martin. 4680 cell production in Texas increased 40% quarter-over-quarter. Congrats to the Texas team for producing their 20 million cell off of line one. Texas is now our primary 4680 facility. We’re heavily focused on quality. Scrap is down 40% quarter-over-quarter. With the increased volume and yield improvements, cell costs consistently improved month-over-month within the quarter, although we have a lot more work to do to achieve our steady state goals. And that is our priority. The Cybertruck cell with 10% higher energy than our Model Y cell started production on line two in Texas. This quarter we convert to building 100% Cybertruck cells to simplify and focus the factory as we ramp all four lines in Phase 1 over the next three quarters. Phase 2 of the Texas 4680 facility is currently under construction. The additional four lines incorporate further capital efficiencies over Phase 1, and our target is for them to start producing in late 2024. Lastly, in Kato, we’re retooling to enable large scale pallet runs of our next generation cell designs. Kato’s long-term goal is to be the launch pad for new cells, one generation ahead of our mass production facilities, enabling faster iteration and smoother ramp ups of new designs.

Thank you. The next question from institutional investors. Could you please provide an update on capacity expansion plans for the company’s factories in Berlin and Austin, and the opening schedule of Gigafactory Mexico?

Berlin and Austin factories, the current priority is actually to maximize the output from our existing lines, by laser focus on efficiency improvement. As always, maintaining a high quality and the reducing per unit cost will be as critical as growing the production volume. For Mexico, we’re working on infrastructure and factory design in parallel with the engineering and development of the new production that we’ll be manufacturing there. That’s what I can share for now.

In Mexico, we’re laying the groundwork to begin construction and doing all the long lead items. But I think we want to just get a sense for what the global economy is like before we go full tilt on the Mexico factory. I’m worried about the high-interest rate environment that we’re in. I just can’t emphasize this enough that the vast majority of people buying a car is about the monthly payment. And as interest rates rise, the proportion of that monthly payment that is interest increases naturally. So, if interest rates remain high or if they go even higher, it’s that much harder for people to buy the car; they simply cannot afford it. And we are tracking, I believe at this point for Model Y to be the best-selling car on Earth, but not just in revenue, but in unit volume. If you compare that to the other vehicles that are number two and number three and whatnot, they cost much less than our car. So, we’re just hitting law of large numbers situations here. I know people want us to advertise; we are advertising. I think there’s something to be gained on the advertising front. I don’t think it’s nothing. But informing people of a car that is great but they cannot afford doesn’t really help. So that is really the thing that must be solved is to make the car affordable or the average person cannot buy it for any amount of money or they can’t afford it. So, this is a big deal.

The next question is, when do you expect Model 3 Highland to be available in the U.S.? I just wanted to address that unfortunately, we don’t answer product related questions and timings on earnings calls. So let’s go to the next one. Current sell-side consensus assumes that Tesla will deliver 2.3 million vehicles in 2024, representing 28% growth versus 2023 guidance. Is this growth rate achievable without any mass market launches in 2024? And when does Tesla expect to return to its 50% long-term CAGR?

When we look at 2024, there are a lot of moving pieces. I just talked about what is happening in the macroeconomic environment. So, we’re focused on growing our volumes in a very cost-efficient manner and are carefully reviewing all our options, and we’ll be able to provide a much more meaningful update at our next earnings call.

Yes. I mean, at the risk of stating the obvious, it is not possible to have a compound growth rate of 50% forever, or you will exceed the mass of the known universe. I think we will grow very rapidly, much faster than any other car company on Earth by far.

Thank you. Next question is do you have an approximate timeline in mind for the robotaxi driven or non-driven? What excites you most about how this project is progressing?

Robotaxi is essentially non-driven. I’m very excited about our advancements in autonomy; our self-driving software is remarkable, allowing me to navigate Austin without any interventions. This clearly represents the right direction for us, and it’s truly remarkable. Moreover, this same software and methodology will empower Optimus to perform useful tasks and learn simply by observation, which is very exciting for the long term. As I mentioned earlier, if economic output is defined by the number of people multiplied by productivity, and we eliminate constraints on workforce size with a humanoid robot that can function efficiently, the potential for economic growth is nearly limitless. I don't believe anyone can outdo Tesla in this regard. While Boston Dynamics has impressive technology, their robots lack true intelligence. Additionally, we need to ensure that our humanoid robot can be mass-produced effectively. Eventually, these robots could even manufacture more robots. However, we must ensure that this future remains conducive for humans and avoids any negative outcomes. We will focus heavily on localized control for the humanoid robot, ensuring it can be shut down locally, and this feature cannot be altered through software updates; it must be hard-coded.

Thank you. The next question is, why was the price dropped on FSD if it is getting better and robotaxi is expected so soon?

Well, we just wanted to make it more affordable as more people try it. Yes, I think, over time, the price of FSD will increase proportionate to its value. So we regard the current price as a kind of a temporary low.

The next question is again on FSD. Mercedes is accepting legal liability for when its Level 3 autonomous driving system, Drive Pilot, is active. Is Tesla planning to accept legal liability for FSD? And if so, when?

Well, there’s a lot of people that assume we have legal liability judging by the lawsuits. We’re certainly not being let off the hook on that front, whether we’d like to or wouldn’t like to do.

I mean I think it’s important to remember for everyone that Mercedes’ system is limited to roads in Nevada and some certain cities in California; it doesn’t work in the snow or the fog. It must have a lead car in plain, only 40 miles per hour. Our system is meant to be holistic and drive in any conditions, so we obviously have a much more capable approach. But with those kinds of limitations, it’s really not very useful.

No, I think some people understand the profundity of the Tesla AI system. It’s very, very few. It’s basically Baby AGI. It has to understand reality in order to drive, Baby AGI.

Thank you. The next question on Optimus. Will Optimus be working on Gigafactory lines next year? If so, how many would you guess will be deployed?

At this point, we are not ready to discuss details of the Optimus program, but we will provide periodic updates online. A year ago, Optimus could barely walk, and now it can do yoga. So, a few years from now, it will probably be able to do ballet.

Sounds good. And the last question from investors is Neural net path planning represents a significant advance in capability and safety for FSD. What steps is Tesla taking to make this technology available outside the U.S.?

Yes. Our strategy has been to focus on a limited number of locations because trying to implement it everywhere at once makes the challenge greater. This is why we are currently operating only in North America. In many parts of the world, you need to secure approvals before launching new technologies, while in the U.S., you have the flexibility to deploy at your own risk. Most countries require extensive approval processes, and we prefer to engage in those only when we believe the technology is nearly ready for mainstream use there. I understand that it is not yet available in those other countries, but we are continuously working on improvements. The technology needs to demonstrate that it far exceeds the entry probability of a human, or at least shows a much lower probability than a human. I believe we are moving towards that goal quickly. In the past, I may have been overly optimistic, primarily because progress tends to appear as a logarithmic curve. Initially, improvements can seem rapid, and if you were to project that linear progress, it looks like self-driving would be attainable soon. However, the rate of improvement eventually curves downward. I would describe our advancements in real-world AI as a series of stacked logarithmic curves, which also applies to areas like large language models. Each curve builds upon the last one, and as we continue to stack them, we will eventually achieve full self-driving capability.

Thank you. Let’s now go to analyst questions. The first question comes from Will Stein from Truist.

We learned earlier on the call, it sounds like you don’t think the truck will ramp to significant volume until its third year of production. Should we have a similar anticipation for the ramp of the next-gen platform, or is there any reason that we should be maybe more optimistic or pessimistic about the ramp profile there?

Yes, to clarify, this isn’t really the third year of production; it’s more like the 18th month of production in my estimation. The process begins this year, continues into next year, and extends to 2025. While it covers three calendar years, it actually represents only 18 months of production. I would be very disappointed if it took us three years, as that would be surprising. Achieving significant volume and success within 18 months from the initial deliveries involves an immense amount of effort, and I can’t emphasize enough the level of dedication required to accomplish this, which is quite overwhelming. I have experienced this numerous times before, and here we go again.

Similar path for the next-gen platform?

I mean, there’s like unique complexity to Cybertruck.

Yes. We certainly faced challenges with Cybertruck. It’s a unique product that only comes around occasionally, and such products are incredibly difficult to bring to market and achieve significant volume and success. This difficulty is inherent to their novelty. In contrast, the smaller vehicle that is high-volume and low-cost is much more traditional.

Yes. In terms of the technologies we’re putting into it, we didn’t have to invent full hard stainless steel or have mega 9,000-ton castings or the largest hot stamping in the world or new technical difficulties quite in the same way as the Cybertruck. I think it will be quite a fast ramp. As I was just saying, we’re doing everything possible to simplify that vehicle in order to achieve a units per minute level that is unheard of in the auto industry. I mean, the single location makes it easier to automate. It also makes it lower cost. Yes, that’s intrinsically lower cost.

Yes. Let’s be clear, it will be cool, but it’s utilitarian. It’s not meant to fill you with magic. It can get you from A to B. It will be still beautiful. But it’s utility.

That’s not 14 inches of suspension.

Yes. So I mean, the Cybertruck has a lot of bells and whistles.

All right. Thank you very much. Let’s go to Pierre Ferragu from New Street Research.

I have a follow-up question about FSD, particularly regarding its pricing and adoption. I agree that as FSD develops, its value should increase. However, I believe that the ultimate functionality of FSD, which could allow for robotaxi operation, may not appeal to everyone. There’s also a more basic version of the service that functions like a chauffeur, where the car drives itself but the passenger must still be present. Additionally, there could be a version requiring hands-on input from the user. I think we should consider offering a lower-cost, less feature-rich version of FSD that could achieve widespread use among your current customers, alongside a more advanced version that would likely see less uptake. I'm curious if you are considering this and how you’re approaching the financial impact of FSD over time, as well as whether you might adjust your pricing model to encourage greater adoption.

Yes. A fully autonomous vehicle presents remarkable economic advantages. Currently, passenger vehicles are utilized for only about 10 to 12 hours each week. This is based on an average daily usage of 1.5 hours, amounting to roughly 10 hours in a week, which comprises a small fraction of the total 168 hours available. Additionally, there are expenses related to parking and insurance, and general maintenance of the vehicle. The overhead costs are significant. Therefore, the financial aspect of the system is extremely favorable, especially since we believe that all the vehicles we produce are capable of full autonomy. If we can increase the utility of these cars to about 50 hours a week, which is just under one-third of the week, this would enhance their value fivefold, while the costs remain unchanged. This places us in a position of being a hardware company with software profit margins.

Pierre, do you have a follow-up?

Yes, I have actually a follow-up on a different topic for you that I have if that’s okay. It’s about your gross margin in the quarter. Could you give us a sense of how the gross margin evolved sequentially, how much was the impact of idle costs? How much was like the sequential benefit, I imagine, of production ramping at Berlin and Austin? And then I saw this massive jump in energy storage, a very strong positive surprise. So, if you can give us the background on that and tell us how we should think about that gross margin going forward.

Thank you for the question. There are several elements to consider regarding your inquiry. From a Q3 perspective, factory idle time had an impact, though I won't specify the exact percentage, but it was significant for the quarter. On the other hand, certain factories ramped up effectively and contributed positively to our margins this quarter. One factory came close to matching the per unit cost of our established Fremont factory, which was a good sign. Regarding energy margins, the Megapack deployment was a major driver, and that product has performed well, especially regarding costs. However, I want to note that Megapack deployments can be inconsistent. While we had a strong quarter, future deployments may face some downward pressure as we try to establish that product in various markets.

Yes, product in transit.

Okay. Thank you very much. Let’s go to Rod Lache from Wolfe Research.

It's great to see the improvement in vehicle costs despite the downtime. You've reduced the average vehicle cost by about $2,000 over the past year. Can you provide insight into the rate of improvement expected from the factory changes you mentioned? Is there a way to communicate the pace of improvement for your current product moving forward? Additionally, can you share when we can expect to see the next-generation lower-priced product that you discussed earlier this year?

Yes. When it comes to product margins, there are various factors at play. Some aspects are within our control, while others are not. We anticipate some advantages from our ongoing cost reduction initiatives. However, we just completed our factory upgrades at the end of Q3, and some facilities are still in the initial ramp-up stage in Q4. We're not yet at our desired productivity levels in these factories, which will affect us in the short term. Additionally, as Elon mentioned, we will be ramping up the Cybertruck production, which will present further challenges. Moreover, the overall uncertainty in the macroeconomic landscape complicates our ability to make accurate predictions about our performance. This situation is continually evolving, and we are closely monitoring and responding to it on a daily basis.

I want to emphasize that we are committed to finding additional cost reductions for 2024. We have a strong pipeline of opportunities and are working diligently on both engineering and factory operations. Our goal is to maintain or exceed the trend that you have seen, and we are putting in every effort to achieve this.

The timing of the next-gen product, can you share that?

Not at this time.

Okay. As a follow-up, price is certainly a factor influencing demand, but that does not operate in isolation. You mentioned earlier that you may be facing the law of large numbers with some of your products. Can you elaborate on your perspective regarding price elasticity in the current macro environment? Any insights on that would be appreciated.

I believe there is a significant price elasticity. Honestly, if our car were priced the same as a RAV4, it is unlikely that people would choose the RAV4. It's important to mention that many of these incentives, such as tax credits, are hard for the average person to access because most people don’t have $10,000 or even $7,500 readily available. A lot of individuals are living paycheck to paycheck and dealing with substantial debt, including credit card and mortgage debt. This is the reality for most. It can be challenging for high-income individuals, like those earning over $200,000 a year, to relate to the lives of those making $50,000, $60,000, or $70,000 a year, which is the majority. For many, this tax credit isn’t feasible because they can't upfront $7,500 for 18 months or even 6 months to benefit from the tax credit, and in some instances, they might not even have $7,500 in taxes owed. Ultimately, what matters most to people is how much money they need to pay immediately and their monthly expenses. That’s where the focus should be, and when you consider it this way, our car remains significantly more expensive than a RAV4.

Now one other thing which I’ll add, when you look at car buying in general, we’re trying to get to the next set of EV adapters.

Not an EV adapter. Just who wants a great car.

Exactly.

It's surprising to hear some people question why not everyone works from home. It reminds me of the disconnect some individuals have when they suggest such ideas, as if they forget about those who must work in factories or serve in restaurants. These comments show a lack of understanding of the reality many face. I've often spent nights at the factory because it was necessary, highlighting the importance of cost in our industry. For most people, keeping expenses down isn't optional; it's essential. We need to ensure our cars are affordable for everyone. I keep mentioning interest rates because they significantly impact the overall cost of a vehicle. Our internal analysis suggests that despite the price reductions we've made for the Model Y, the increase in monthly payments due to rising interest rates has kept the net price of the Model Y nearly unchanged.

If you factor in the...

Yes, what I’m trying to convey is that the important factor is the monthly payment. It’s about how much money individuals can afford to put down and whether they have sufficient funds in their bank account to cover it, along with the monthly payment itself. The specifics of that payment, whether it's principal, interest, or otherwise, don't matter as long as it doesn't lead to a negative bank balance. Transitioning from near zero interest rates to the currently high rates means that while the monthly payment remains largely unchanged, a larger portion is now going toward interest. Additionally, there are extra challenges, such as the increased difficulty in obtaining credit. Many people are finding it hard to secure credit, even if they have stable jobs, as banks are hesitant to issue loans after several institutions faced significant struggles earlier this year.

There are also just fewer options, even if they planned out credit, there are fewer banks to go there.

Digital banks still exist. However, if your bank is gone, you need to form a relationship with a new one. Many regional banks have failed, including Credit Suisse, which was a shock considering it was around for about 160 years. It's astonishing to think it no longer exists. I believe there are still more issues to come regarding bad credit. Clearly, commercial real estate is struggling significantly, and credit card debt has increased dramatically. The interest rates on credit cards are exorbitant, exceeding 20%. This high interest means that people are unlikely to pay off their balances. If you’re unable to pay off your credit card dues while accruing 20% interest, you are likely heading towards financial trouble.

Thank you. Let’s go to the next question from George from Canaccord.

I would like to know more about the factors that could contribute to a decrease in cost per vehicle in upcoming quarters, as mentioned in your written remarks. Can you elaborate on potential contributors such as increased scale, enhanced factory utilization, or reductions in material costs? Are innovations like gigacasting also a factor? It would be helpful to have some data points to instill confidence that costs will decline over time. Additionally, I’ve seen reports suggesting that radar has been offered as an option for some Model Ys in China. Is there any truth to that, and if so, what is the reasoning behind it?

We haven’t included radar in our plans. We are testing a Tesla-designed radar in the Model S and X, but there are no plans to incorporate it into the Model 3 and Y. Just as skilled human drivers can operate safely using just their eyes, our cars will surpass average driver safety using only vision, since they can monitor all directions simultaneously. Unlike humans, the computer doesn’t get tired or distracted. The effectiveness of radar comes down to its ability to impact accident probability. For radar to be truly effective, it must be capable of performing radar-only actions; otherwise, it creates confusion between vision and radar. This is why we disabled radar in vehicles we had previously released; models 3 and Y originally included radar but it was deactivated because it produced more noise than useful data. Although our Tesla-designed radar has high resolution and potential, it’s still uncertain how beneficial it will actually be.

Regarding costs, as Drew mentioned earlier, we continually strive to engineer our products to be cheaper and more efficient. This involves innovations on the engineering front as well as efforts on the supply chain side. We collaborate with our partners to automate their production lines and reduce their bottlenecks and expenses. When it comes to logistics, ensuring the timely delivery of parts to the factory requires constant monitoring of costs across various areas, and we approach this with unwavering rigor. Operations efficiency. All of the above.

Yes. I would say there’s a whole laundry list of things which we are chasing. We internally call it the cost attack, where we’re literally going line by line and saying how can we make it better. And it’s a grind.

It’s a grind. It’s like Game of Thrones but pennies. I mean first approximation, if you’ve got a $40,000 car, and roughly 10,000 items in that car, that means each thing, on average, costs $4. So in order to get the cost down say by 10%, you have to get $0.40 out of each part on average. It is a game of pennies.

We play it.

Willingly, yes. We’ve done it many, many times. And even something as simple as like a sticker, like there’s too many stickers internally in the car that nobody ever sees. There’s something as simple as a QR code. You may think, well, putting a QR code on a part. Why don’t you just put them on there, it’s like, well, are we actually going to use that QR code? That’s a penny.

That’s a penny.

Yes, exactly. And then inevitably, sometimes the QR code doesn’t go on properly or you can’t read it properly, and it stops the line.

More than a penny.

On top of it, like we said, we did some factory upgrades, so we expect volume to go up. That would also bring some savings from higher production. But then on the flip side, we’re going to be ramping a new product like Cybertruck, which we talked about. So, yes, so those are the real puts and takes we are working for.

Yes, but unfortunately, there's not some hidden treasure we left in the car. We are focusing on enhancing the quality and capabilities of the vehicle because it's easy to cut costs by compromising on functionality. It’s similar to trying to lose weight; while you could take an extreme measure, like chopping off an arm, it wouldn't be effective in the long run. To genuinely lose weight, one needs to eat less and exercise. It’s not the most enjoyable process since food is tasty, and personally, I’m not fond of exercising. I wish I were, but I’m not, unless moving the mouse counts, in which case, I really enjoy that.

All right. Let’s go to Colin Langan from Wells Fargo.

You said in the commentary that you’re not going full tilt on the plant in Mexico until there are signs that the economy is strong. Can you continue at a 50% CAGR without that plant? And where would that come from? And any color on what you mean sort of not going full tilt? Could that plant get delayed indefinitely, or what are you kind of talking about?

We are definitely moving forward with the factory in Mexico and feel very positive about that location. We've invested considerable effort in evaluating various sites, and we believe this is the right choice. The main factor now is the timing. The situation regarding interest rates is concerning; they need to decline because rising rates make affordability harder, akin to increasing vehicle prices. My ability to predict our factory's timeline hinges on the interest rates. If I knew what they would be, I could give a clearer picture of when we would begin construction. We plan to initiate the early phases of construction next year. However, my experience during the 2009 financial crisis, when General Motors and Chrysler faced bankruptcy, lingers in my mind. Back then, Tesla was barely surviving, and we only secured critical financing on Christmas Eve of 2008, which was a dire situation. I prefer not to rush into uncertain circumstances, especially given the geopolitical issues at play, and we are prepared to be cautious.

Like in Giga Texas. You said we still have room in this building. It’s not full with Cybertruck and the line. There’s plenty of growth opportunities still to have inside the building where our team already is.

We also have 2,000 acres here.

There’s also...

We’re currently utilizing only a small portion of the land we have available. Technically, we could conduct all our scaling and research in this area. Our biggest challenge is personnel, and the greater Austin area has around 2 million people. While people are moving here and willing to relocate, there is a housing crisis, and they need accommodation. I’m just curious about the potential challenges we might face. I believe Tesla is a highly capable company, but we must be prepared for tough situations, especially if the macroeconomic conditions worsen. Even the best companies will face difficulties in a storm, and we are not immune to these challenges. This situation will affect not just us but the entire market, beyond just the automotive sector. If interest rates start to decrease, we will begin to accelerate our growth.

All right.

If anyone has any guesses about this, I would appreciate being less wrong. I apologize if I seem overly cautious, but I might be more anxious than necessary due to my experiences from 2009, which were quite significant. The years 2017 through 2019 were also challenging. The auto industry can be cyclical because consumers tend to hold off on purchasing new cars during economic uncertainty. Car companies thrive in favorable economic conditions and struggle in tough times. In contrast, selling essentials like bread is different; people will continue to buy bread because it is a necessity. New cars, however, are not essential.

Especially if there are wars going on and then that impacts your sentiment.

Yes. I mean people are reading about wars all over the world. Buying a new car tends to not be front of mind.

All right. Unfortunately, that’s all the time we have today. Thank you very much for all of your good questions, and we’ll see you again in three months. Thank you very much.