Good afternoon, everyone and welcome to Tesla's Second Quarter 2024 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. Our Q2 results were announced at about 3:00 p.m. Central Time and the Update Deck we published at the same link as this webcast. During this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. During the question-and-answer portion of today's call, please limit yourself to one question and one follow-up. Please use the raise hand button to join the question queue. Before we jump into Q&A, Elon has some opening remarks. Elon?

Thank you. So to recap, we saw large adoption exploration in EVs, and then a bit of a hangover as others struggle to make compelling EVs. So there are quite a few competing electric vehicles that have entered the market. And mostly they’ve not done well, but they’ve discounted their EVs very substantially, which has made it a bit more difficult for Tesla. We don’t see this as a long-term issue, but really as fairly short-term. And we still obviously firmly believe that EVs are best for customers and that the world is headed for a fully electrified transport, not just the cars, but also aircraft and boats. Despite many challenges, the Tesla team did a great job executing, and we did achieve record quarterly revenues. Energy storage deployments reached an all-time high in Q2, leading to record profits for the energy business. And we are investing in many future projects, including AI training and inference and a great deal of infrastructure to support future products. We won't get too much into the product roadmap here, because that is reserved for product announcement events. But we are on track to deliver a more affordable model in the first half of next year. The biggest differentiator for Tesla is autonomy. In addition to that, we have scale economies and we're the most efficient electric vehicle producer in the world. Meanwhile, while others are pursuing different parts of the AI robotic stack, we are pursuing all of them. This allows for better cost control, more scale, quicker time to market, and a superior product, applying not just to autonomous vehicles, but to autonomous humanoid robots like Optimus. Regarding Full Self-Driving and Robotaxi, we've made significant progress with Full Self-Driving in Q2 and with version 12.5 beginning rollout; we think customers will experience a step-change improvement in how well supervised full self-driving works. Version 12.5 has 5x the parameters of 12.4 and will finally merge the highway and city stacks. The highway stack, at this point, is pretty old, so often the issues people encounter are on highways; but with 12.5, we are finally merging the two stacks. Most people actually don't know how good the system is, and I would encourage anyone to understand the system better to simply try it out and let the car drive you around. One of the things we're going to do to ensure people understand the capabilities of the car is, when delivering a new car and picking up a car for service, to show people how to use it and drive them around the block. Once people use it at all, they tend to continue using it. This will be a massive demand driver; even unsupervised full self-driving will be a massive demand driver. As we increase the miles between interventions, it will transition from supervised full self-driving to unsupervised full self-driving, unlocking massive potential. We postponed the sort of Robotaxi product unveil by a couple of months where it shifted to 10/10 because I wanted to make some important changes that I think would improve the vehicle and we are also going to show off a couple of other things. Moving it back a few months allowed us to improve the Robotaxi as well as add in a couple of other things for the product unveil. We're also nearing completion of the South expansion of Giga Texas, which will house our largest training cluster to date. So, it will be an incremental for 50,000 H100s plus 20,000 of our hardware 4 AI5 Tesla AI computer. With Optimus, it is already performing tasks in our factory, and we expect to have Optimus production Version 1 in limited production starting early next year. This will be for Tesla consumption. It's just better for us to iron out the issues ourselves. However, we expect to have several thousand Optimus robots produced and in operation by the end of next year in the Tesla factories. Additionally, in 2026, production will ramp up quite a bit, and we will provide Optimus robots to outside customers at that time. For the energy business, this is growing faster than anything else. We are really demand-constrained rather than production-constrained. We are ramping up production in our U.S. factory as well as building the Megapack factory in China, which should roughly double our output, maybe more than double—potentially triple. In conclusion, we are super excited about the progress across the board. We are changing the energy system, how people move around, how people approach the economy. The undertaking is massive, but I think the future is incredibly bright. I can't emphasize enough the importance of autonomy for the vehicle side and for Optimus. Although the numbers sound crazy, I think Tesla producing at volume with unsupervised FSD will essentially enable the fleet to operate like a giant autonomous fleet. ARK Invest thinks the valuation will be on the order of $5 trillion; I think they are probably not wrong. Long-term, I believe Optimus will achieve a valuation several times that number. I want to thank the Tesla team for strong execution and look forward to exciting years ahead.

Great. Thank you very much, Elon, and Vaibhav has some opening remarks as well.

Thanks. As Elon mentioned, the Tesla team rose to the occasion yet again and delivered on all fronts with some notable records. In addition to those records, we saw our automotive deliveries increase sequentially. I would like to thank the entire Tesla team for their efforts in delivering a great quarter. On the auto business front, affordability remains top of mind for customers, and in response in Q2, we offered attractive financing options to offset sustained high interest rates. These programs had an impact on revenue per unit in the quarter. These impacts will persist into Q3 as we have already launched similar programs. We are now offering extremely competitive financing rates in most parts of the world. This is the best time to buy a Tesla; if you are waiting on the sidelines, come out and get your car. We had a record quarter on regulatory credits, revenues, and as well. On net, our auto margins remained flat sequentially. It is important to note that the demand for regulatory credits is dependent on other OEMs’ plans for the kind of vehicles they are manufacturing and selling, as well as changes in regulations. We pride ourselves on being the company with the most American-made cars and are continuing our journey to further localize our supply chain, not just in the U.S., but in Europe and China as well for the respective factories. As always, our focus is on providing the most compelling products at a reasonable price. We have stepped up our efforts to offer more trims that have an estimated range of more than 300 miles on a single charge. We believe this, along with the expansion of our supercharging network, is the right strategy to combat range anxiety. Since the revision of FSD pricing in North America, we've seen production rates increase meaningfully and expect this to be a driver of vehicle sales as the feature set improves further. Cost per vehicle declined sequentially when we removed the impact of Cybertruck. While we are experiencing material costs trending down, there is latency on the cost side, and such reductions would show up in the P&L when the vehicles built with these materials get delivered. Additionally, as we head into the second half of the year, it is important to note that we are still ramping Cybertruck and Model 3 and are also impacted by varying amounts of tariffs on both raw materials and finished goods. While our teams are working tirelessly to offset these, unfortunately, it may impact the cost in the near term. We've previously talked about the potential of the energy business and now feel excited that the foundation laid over time is bearing the expected results. Energy storage deployments have more than doubled, with contributions not just from Megapack but also Powerwall, resulting in record revenues and profit for the energy business. The energy storage backlog is strong. As discussed before, deployments will fluctuate from period to period, with some quarters seeing large increases and others seeing a decline. Recognition of storage gigawatt-hours is dependent on a variety of factors, including logistics timing as we send units from a single factory to markets across the world, customer readiness, and in the case of EPC projects, construction activities. Moving on to the other parts of the business, service profit and other gross profits also improved sequentially from the improvement in service utilization and growth in our collision repair business. The impact of our recent reorganization is reflected in restructuring other items on the income statement. Just to level set, this was about $622 million of charge, which got recorded in the period. I want people to remember that we've called it out separately in the financials. Sequentially, our operating expenses, excluding surcharges, reduced despite an increase in spending for AI-related activities and higher legal and other costs. On the CapEx front, while we saw a sequential decline in Q2, we still expect the year to be over $10 billion in CapEx as we increase our spend to bring a 50k GPU cluster online. This new cluster will immensely increase our capabilities to scale FSD and other AI initiatives. We reverted to positive free cash flow of $1.3 billion in Q2. This was despite restructuring payments made in the quarter, and we ended the quarter with over $30 billion of cash and investments. Once again, we've begun the journey towards the next phase for the company, with the building blocks being placed. It will take some time but will be a rewarding experience for everyone involved. Once again, I would like to thank the entire Tesla team for their efforts.

Great. Thank you very much, Vaibhav. Now let's go to investor questions. The first question is, what is the status on the Roadster?

With respect to Roadster, we've completed most of the engineering. I think there are still some upgrades we want to make to it, but we expect to be in production with Roadster next year. It will be something special.

Fantastic. The next question is about the timing of the Robotaxi event, which we've already covered. So, we'll go to the next question: when do you expect the first Robotaxi ride?

The question is about when we can expect unsupervised full self-driving. It's challenging; my previous predictions have been overly optimistic. Based on the current trend, it seems we should achieve a sufficient number of miles between interventions to allow for unsupervised driving potentially by the end of this year. I would be surprised if we can't accomplish it next year. It seems quite likely to me, as the trend indicates we will exceed human performance in miles between interventions next year.

Thank you very much. Our third question is, the Cybertruck is an iconic product that wows everyone who sees it. Do you have plans to expand the cyber vehicle lineup to a cyber SUV or cyber van?

I think we want to limit product announcements to when we have a specific product announcement event, rather than earnings calls.

Great, thank you. Our next question is, what is the current status of 4680 battery cell production, and how is the ramp-up progressing?

Yes, 4680 production ramped strongly in Q2, delivering 51% more cells than Q1 while reducing COGS significantly. We currently produce more than 1,400 Cybertrucks of 4680 cells per week, and we'll continue to ramp output as we drive costs down further towards the cost parity target we set for the end of the year. We've built our first validation Cybertruck with the dry cathode process made on our mass production equipment, which is a huge technical milestone, and we're super proud of that. We're on track for production launch with dry cathode in Q4, and this will enable cell costs to be significantly below available alternatives, which was the original goal of the 4680 program.

Great. Thank you very much. The next question is any update on Dojo?

Yes, so Dojo, I should preface this by saying I'm incredibly impressed by NVIDIA's execution and the capability of their hardware. What we are seeing is that the demand for NVIDIA hardware is so high that it's often difficult to obtain the GPUs. I am quite concerned about being able to get state-of-the-art NVIDIA GPUs when we want them. Therefore, we need to put more effort into Dojo to ensure we have the training capability we need. So we are going to double down on Dojo, and we do see a path to being competitive with NVIDIA with Dojo.

Right. The next question is what type of accessories will be offered with Optimus?

Optimus is intended to be a generalized humanoid robot with a lot of intelligence. It's like asking what kind of accessories will be offered with a human. It's really intended to be able to be backward compatible with human tasks. So it would use any accessories that a human would use.

Thank you. The next question is, do you feel you're cheating people out of the joys of owning a Tesla by not advertising?

We are doing some advertising, so, want to say something?

Our fundamental belief is that we need to be providing the best products at a reasonable price to consumers. Just to give you a fact, in the U.S. alone in Q2, over two-thirds of our deliveries were to people who had never owned a Tesla before, which is encouraging. We've spent money on advertising and other awareness programs, and we have adjusted our strategy. We're not saying no to advertising, but this is a dynamic play, and we know that we have not exhausted all our options and therefore plan to keep adjusting in the latter half of this year as well.

Great. Thank you very much. The next question is on energy growth, which we already covered in opening remarks, so we'll move on to the next one. What is the updated timeline for Giga Mexico, and what will be the primary vehicles produced initially?

We are currently paused on Giga Mexico. I think we need to see just where things stand after the election. Trump has said that he will put heavy tariffs on vehicles produced in Mexico. So it doesn't make sense to invest a lot in Mexico if that is going to be the case. We need to see how things play out politically. However, we are increasing capacity at our existing factories quite significantly. The Cybertruck or Robotaxi will be produced here at our headquarters at Giga Texas.

All right. Thank you.

As well, Optimus towards the end of next year for Optimus production Version 2, the high volume version of Optimus will also be produced here in Texas.

Great. Thank you. Just a couple more. Is Tesla still in talks with an OEM to license FSD?

There are a few major OEMs that have expressed interest in licensing Tesla full self-driving. I suspect there will be more over time, but we can't comment on the details of those discussions.

All right. Thank you. And the last one, any updates on investing in xAI and integrating Grok into Tesla software?

Tesla is learning quite a bit from xAI. It's been helpful in advancing full self-driving and in building up the new Tesla data center. Regarding investing in xAI, we need to have shareholder approval for any such investment. But I’m certainly supportive of that if shareholders are. I think we need a vote on that. There are opportunities to integrate Grok into Tesla's software.

All right. Thanks very much. And now we will move on to analyst questions. The first question comes from Will Stein from Truist. Will, please go ahead and unmute yourself.

Great. Thanks so much for taking my question. This relates a little bit to the last one that was asked. Elon, I share your strong enthusiasm about AI and I recognize Tesla's opportunity to do some great things with the technology. But there are some concerns I have about Tesla's commercialization, and that's what I'd like to ask about specifically. There were some news stories through the quarter that indicated that you redirected some AI compute systems that were destined for Tesla instead to xAI or perhaps it was to X; I'm not sure. And similarly, a few quarters ago, if you recall, I asked about your ability to hire engineers in this area, and you noted that there was a great desire for some of these engineers to work on projects you were involved with, but some of them weren't at Tesla; they were instead at xAI or perhaps even X again. So the question is, when it comes to your capital investments, your AI R&D, your AI engineers, how do you make allocation decisions among these various ventures and how do you make Tesla owners comfortable that you're doing it in a way that really benefits them? Thank you.

Yes, I mean, I think you're referring to a very old article regarding GPUs. That article is about 6 or 7 months old. At Tesla, we had no place to try them on, so it would have been a waste of Tesla capital because we would just have to order H100 and have no place to try them. It wasn't a matter of picking xAI over Tesla. There was no space in our data centers. We've been working around the clock to complete the South extension on the Tesla Giga factory in Texas. That South extension will house 50,000 H100s, and we're beginning to move the H100 server racks into place there. But we really needed that to be completed. You can't just order GPUs and turn them on; you need a data center, and it's not possible. So I want to be clear—that was in Tesla's interest, not contrary to it. Does Tesla no good to have GPUs that it can't turn on. The South extension can accommodate GPUs, and we are starting to move them in this week. There are engineers that only want to work on AGI. So when trying to recruit them to Tesla, they were only interested in working on AGI and not on Tesla's specific problems, and they would prefer to start a startup. So it was a case of either they go to a startup and I am involved or they do a startup and I am not involved. Those are the two choices. They were not going to come to Tesla under any circumstances.

I would add that AI is a broad spectrum, and there are many things which we are focused on, like full self-driving as Tesla and also Optimus. But there's the other spectrum of AI which we're not working on, and that's the kind of work which other companies are trying to do in this case, like xAI. You have to keep in mind that it's a broad spectrum. It's not just one specific thing.

And once again, I want to just repeat myself here. I tried to recruit them to Tesla, including to say like, you can work on AGI if you want, and they refused. Only then was xAI created.

I really appreciate that clarification. If I can ask one follow-up, it relates to the new vehicles that you're planning to introduce next year. I understand this is not the venue for product announcements, but when we think about the focus, I've heard on the one hand that the focus is on cost reduction. On the other hand, you also said that the Roadster would come out. Should we expect other maybe more limited variants like, similar to the cars that you make today, but with some changes or improvements? Should we expect that to be a significant part of the strategy in the next year or two?

I don't want to get into details of product announcements. We must be careful of the Osborne effect here. If you start announcing something great, it affects our near-term sales. We're going to make great products in the future, just like we have in the past, end of story.

Right. The next question comes from Ben Kallo from Baird. Ben, please go ahead and unmute yourself.

Hi. Thanks for taking my question. When we think about revenue contribution and with energy growing so quickly and Optimus on the come, how do we think about the overall segments longer term? And then do you think that auto revenue will fall below 50% of your overall revenue? My follow-up is just on the last call you talked about distributed compute on your new hardware. Could you just update us and talk a little bit more about that, the timeline for it and how you would reward customers for letting you use their compute power and their cars? Thanks.

Yes, I mean, as I've said a few times, I think the long-term value of Optimus will exceed that of everything else that Tesla combined. So, simply consider the usefulness and utility of a humanoid robot that can do basically anything you ask of it. I think everyone on earth is going to want one. There's 8 billion people on earth, so that's 8 billion right there. Then you've got all of the industrial uses, which is probably at least as much, if not way more. So I suspect that the long-term demand for general-purpose humanoid robots is in excess of 20 billion units. Tesla has the most advanced humanoid robot in the world and is also very good at manufacturing, which these other companies are not. We have all the ingredients necessary for large scale, high utility, generalized humanoid robots. That’s why my rough estimate long-term is in accordance with the ARK Invest analysis of market cap on the order of $5 trillion for autonomous transport, and several times that number for general-purpose humanoid robots. At that point, I'm not sure what money even means, but in a benign AI scenario, we are headed for an age of abundance where there is no shortage of goods and services. Anyone can have pretty much anything they want. It's a very wild future we are heading for.

On the distributed compute?

Yes, distributed compute seems like a pretty obvious thing to do. Where this distributed compute becomes interesting is with our next generation Tesla AI truck, which is hardware viable or what we're calling AI5. From the standpoint of inference capability, it is comparable to B200, and we are aiming to have that in production at the end of next year and scale production in 2026. It just seems like if you've got autonomous vehicles that are operating for 50 or 60 hours a week, there are 168 hours in a week. You have somewhere above 100 hours net computing capability. We need a better word than GPU because GPU means graphics processing unit. There are 100 hours plus per week of advanced AI compute from the fleet, from the vehicles, and probably some percentage from the humanoid robots. It would make sense to do distributed inference. If there is, at some point, a fleet of 100 million vehicles with AI5 and beyond, because you have AI6 and 7 and whatnot, and there may be billions of humanoid robots, that is a staggering amount of inference compute that could be used for general-purpose computing. It does not have to be used for the humanoid robot or the car. So I think that’s just an obvious thing to say—it's more useful than having nothing.

All right. Thank you. The next question comes from Alex Potter from Piper Alex. Alex, please go ahead and unmute yourself.

Perfect. Thanks. I wanted to ask a question on FSD licensing. You mentioned that in passing previously, I was just wondering if you can elaborate on the mechanics of how that would work. I guess presumably this would not be some simple plug-and-play proposition. An OEM would need, I don't know, several years to develop its own vehicle platform based on FSD. I imagine they would need to adopt Tesla's electrical architecture, compute, and sensor stack. Correct me if I'm misunderstanding this, but if you had a cooperative agreement of some kind with another OEM, then presumably it would take several years before you'd be able to recognize licensing revenue from that agreement. Is that the right way to think about that?

Yes, the OEMs are not real fast. There is not really a sensor suite; it's just cameras. But they would have to integrate our AI computer and have cameras for a 360-degree view, and at least the gateway—what talks to the internet and communicates with the Tesla system—needs a gateway computer too. Given the speed at which the auto industry moves, it would take several years before you would see this in volume.

Okay, good. That's more or less what I expected. So then the follow-up here is, if you did sign an FSD licensing agreement with another automaker, when do you think you would disclose that? Would you do it right when you signed the agreement or only after multiple years have passed and the vehicle is ready to be rolled out?

It depends on the OEM. We would be happy either way. It depends on what kind of arrangement we enter into. A lot of those things are not resolved yet, so we'll make that determination as and when we get to that point. The kind of deals that are obviously relevant are only if some OEM is willing to do this with a million cars a year or something significant. It's not; if it's like 10,000 or 100,000 cars a year, we can just make that ourselves.

All right, thank you. The next question comes from Dan Levy from Barclays. Dan, please go ahead and unmute yourself.

Hi, good evening. Thanks for taking the questions. First, wanted to start with a question on Shanghai. You've leveraged Shanghai as an export center due to its lower cost, and that makes sense. But maybe you can just give us a sense of how the strategy changes, if at all, given the implementation of tariffs in Europe. Also to what extent your import of batteries from China into the U.S. might change given the tariffs? Thank you.

Yes. I think I covered some part of it in my opening remarks, but just to give you a little more on the tariff side: the European authorities sampled certain OEMs in the first round to establish the tariffs for cars being imported from China into Europe. While we were not picked up in our individual examination in the first round, they did pick us up in the second round. They visited our factory; we worked with them, provided all the information. As a result, we are adjusting our import strategy out of China into Europe. One other thing to note is that in Q2 itself, we started building right-hand Model Y out of Berlin, and we also delivered it in the U.K. We are still importing Model 3s into Europe out of Shanghai, and we are still evaluating what is the best alternative management for this situation based on the examination by the European authorities. We cooperated with them and are confident that we should get a better rate than what they imposed for now. This is evolving, and we are adjusting as fast as we can.

Great. Thanks. Yes, thank you. As a follow-up, wanted to ask about the Robotaxi strategy and specifically, the shareholder deck here notes that the release is going to be—one of the gating factors is regulatory approval. Can you help us understand which regulations specifically we should be looking for? Is it FMVSS—that standard? To what extent does the strategy shift? You've done with FSD more of a nationwide, no-boundary approach. Is the Robotaxi approach one that's more geofenced and more driven by a state-by-state approach?

Our solution is a generalized solution like what everybody else has. If you see like Waymo, they have a very localized solution that requires high-density mapping; it's quite fragile. Their ability to expand rapidly is limited. Our solution is a general solution that works anywhere; it would even work on a different Earth. Once we demonstrate that something is safe enough or significantly safer than humans, we find regulators generally support that capability's deployment. If you've got a large number of miles that show unsupervised FSD is safer than human driving, what regulator could really stand in the way of that? They have a moral obligation to approve. I don't think regulatory approval will be a limiting factor. The self-driving capabilities of this are deployed outside of North America are far behind that in North America. With Version 12.5 and maybe a 12.6, we will likely ask for regulatory approval of the Tesla supervised FSD in Europe, China, and other countries soon, which will be a helpful demand driver in those regions, obviously.

Thank you. Just to …

Go ahead, Travis.

In terms of regulatory approval, the vehicles are governed by FMVSS in the U.S., which is the same across all 50 states. The road rules are uniform across all 50 states. Creating a generalized solution gives us the best opportunity to deploy in all 50 states. Of course, there are state and even local and municipal level regulations that may apply to being a transportation company or deploying taxis. But as far as getting the vehicle on the road, that’s all federal and that aligns with what you were suggesting about the data and the vehicle itself.

To add to the technology point, the end-to-end network basically makes no assumption about the location. You could add data from different countries, and it just performs equally well there—almost like close to zero U.S.-specific code in there. It's all just the data that comes from the U.S.

To that end, we can go as humans to other countries and drive with some reasonable amount of assessment in those countries, and that's how you design the FSD software.

Great. Thanks, guys. The next question comes from George from Canaccord. George, please go ahead and unmute yourself.

Hi, everyone. Thank you for taking my questions. Maybe just to expand on the regulatory question for a second. I could be comparing apples and oranges, but GM canceled their pedal-less, wheel-less vehicle. According to the company this morning, their decision was driven by uncertainty about the regulatory environment. From what we understand, and again, maybe I'm wrong here, but the Robotaxi that has been shown, at least in images of the public, is also pedal-less and wheel-less. Is there a different regulatory concern if you deploy a vehicle like that that doesn't have pedals or a wheel, and that may not be different from regular FSD on a traditional Tesla vehicle? Thank you.

The real reason they canceled is GM can't make it work; it's misleading of them to blame regulators, because Waymo is doing just fine in those markets. Their technology is just not up to par.

Right. And maybe just as a follow-up, I think you mentioned that FSD take rates were up materially after you reduced the price. Is there any way you can help us quantify what that means exactly? Thank you.

We've seen a meaningful increase. I don’t want to get into specifics because we started from a low base, but we are seeing encouraging results. The key thing here is, like Elon said, you need to experience it because words can't describe it until you actually use it. That's why we are trying to ensure that every time a car is delivered, people are shown how it works because when you see it working, you realize how great it is. I have a more than 20-mile commute to the factory almost every day. I have zero interventions on the latest stack, and the car just literally drives me. With the latest version, we are tracking your eye movement; the steering wheel lag is almost negligible as long as you're not wearing sunglasses.

We are fixing the sunglasses issue. It's coming soon. You'll be able to drive wearing them. I've talked with smart people who live in New York or maybe downtown Boston and don't ever drive; they ask me about FSD. I'm like, you can just get a car and try it. If you're not doing that, you have no idea what's going on.

Thank you. The next question comes from Pierre from New Street. Pierre, please unmute yourself.

Hey, guys. Thank you for taking my question. So it's on Robotaxi again, and I completely get it that with a universal solution, we will get regulatory approval, we'll get there eventually clicking up miles and compute, et cetera. My question is, how do you think about deployments? I'm thinking that once you have a car that can drive anywhere and replace me and can replace a taxi, but to do the ride-hailing service, you need a certain scale. That means a lot of cars on the road, and you need infrastructure to maintain the cars, take care of them, et cetera. My question is, are you already working on that? Do you have an idea of what your deployment plan looks like? Is it like a Tesla-only plan, or are you looking at partners, local partners, global partners?

Yes. This will just be the Tesla network. You can literally open the Tesla app to summon a car, and it will pick you up and take you somewhere. Our fleet will be on the order of 7 million dedicated global autonomy soon. In the coming years, it'll exceed 10 million, then over 20 million. This is immense scale. The car can operate 24/7, unlike human drivers. There’s a capability for instant scale with a software update. This is for customer on fleet. Think of that as being like an Airbnb. You can choose to allow your car to be used by the fleet or take it back. It can be used by the fleet all the time, or just some of the time, and Tesla would share in revenue with the customer. The giant fleet of Tesla vehicles will operate like a giant Airbnb on wheels. In addition, we will manufacture some cars just for Tesla ownership in the fleet, akin to Uber. All of this will be a Tesla network. There’s an important clause in every Tesla purchase: the Tesla vehicles can only be used in the Tesla fleet. They cannot be used by a third party for autonomy.

Okay. Do you think that scale is like progressively so you can start in a city with just a handful of cars and grow over time? Or do you think there is a critical mass you need to maintain a competitive service quality compared to what like Uber is already delivering?

The entire Tesla fleet essentially becomes active. Maybe there are some people who don’t want their car to earn, but I think most will. It is instant scale.

Thank you. Our next question comes from Colin from Oppenheimer. Colin, please unmute yourself.

Sorry about that, guys. I've got two questions around energy storage. With the tight supply in stationary storage, can you talk about your pricing strategy and how you're thinking about saturation in given geographies, considering that some of these larger systems are starting to shift wholesale power markets in a meaningful way?

We are working with a wide range of players in the market, and our pipeline is quite long. There’s actually a long end in terms of where you enter into a contract where delivery starts. So far, we have good pricing leverage. Mike, want to weigh in on this too?

There's a lot of competition from Chinese OEMs in the vehicle space. We're in close contact with our customers to ensure we remain competitive where they need us to secure contracts to sell power and energy in the markets. We had a very strong contracting quarter and continue to build our backlog for 2025 and 2026. We feel pretty good about where we are in the market. Competition is strong, but we have a strong value proposition offering a fully integrated product with our own power electronics and site-level controls.

Yes, again, what people may not fully understand is that there’s a whole software stack with Megapack. That is one of our unique propositions, and we are using it with other products as well, giving us an edge compared to the competition.

We find customers that can put together a makeshift solution. Sometimes they'll pick that solution, and then that doesn't work, and then they come back to us.

We’re not really seeing saturation on a global scale. There are pockets of saturation in different markets, but we are seeing that new markets are opening up given that demand on the grid continues to increase beyond expectations, which opens up opportunities across different pockets around the world.

Yes, thanks. And then the follow-up here is on 4680 process technology and the role-to-role process. There’s some news around your equipment suppliers. Can you talk about how far along you are in potentially qualifying an incremental supplier around some of those critical process technology steps?

Yes, I can talk about that. Regarding the lawsuit we have with one of our suppliers, I don't think this is going to affect our ability to roll out 4680. We have a very strong IP position in the technology, and most of the equipment we use is in-house designed, and some is in-house built. We can rely on our IP stack and have someone else build it if needed. That's not a real concern right now.

I think people don't understand just how much demand there will be for grid storage. I think they are underestimating this demand by probably an order of magnitude. The actual total energy output of, say, the U.S. grid, if the power plants can operate steadily, is at least two to three times the amount of energy it currently produces. There is a huge gap from peak to trough regarding energy generation. For a grid to avoid blackouts, it must support the load at the worst minute of the worst day, the coldest or hottest day. This essentially means that for the rest of the year, during most times, the grid has massive excess power generation capability but no means to store that energy. Once we add battery packs, we can run the power plants at steady state, which means that any grid anywhere can produce at least twice what it currently produces in the course of a year.

All right. Thank you, Elon. The next question comes from Colin Langan from Wells Fargo. Colin, please unmute yourself.

Oh, great. Thanks for taking my questions. Do you hear me?

Yes.

Yes. I guess when we're going to ask if Trump wins, there's a higher chance that IRA could get cut. I think Elon, you had commented online that Tesla doesn't survive on EV subsidies. But will Tesla lose much support if the IRA goes away? I think Model Y and Model 3 get IRA help for customers, and your batteries get production tax credits. Can you clarify if the end, if the IRA ends, would this be a negative for your profitability in the near-term? Why might it not be a negative? Any framing on the current support you get, IRA-related?

There would be some impact, but I think it would be devastating for our competitors. It would hurt Tesla slightly but long-term, I believe it helps Tesla. I've said on earnings calls before the value of Tesla overwhelmingly is autonomy. These other things are in the noise relative to autonomy. I recommend that anyone who doesn't believe Tesla will solve vehicle autonomy should not hold Tesla stock. They should sell their Tesla stock. If you believe Tesla will solve autonomy, you should buy Tesla stock. All these other questions are in the noise.

I'll add this to clarify a few things: at the end of the day, when we look at our business, we've always been operating with the mindset of whether or not IRA is there. We want our business to grow healthily without depending on subsidies. That's how we’ve always modeled things. Internally, we also consider how we operate without any higher benefit. As Elon said, we definitely have a significant advantage compared to the competition on that front. We've demonstrated that in our numbers over the years, and you cannot ignore the fundamental size of the business. Once you add autonomy, as Elon mentioned, it becomes marginal.

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

That's excellent.