Good afternoon, everyone, and welcome to Tesla's Third Quarter 2024 Q&A webcast. My name is Travis Axelrod, Head of Investor Relations, and I am joined today by Elon Musk, Vaibhav Taneja and a number of other executives. Our Q3 results were announced at about 3 P.M. Central Time in the update deck we published at the same link as this webcast. During this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. 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, something that has affected the industry is I've seen year-over-year declines in order volumes in Q3. Tesla, at the same time, has achieved record deliveries. In fact, I think if you look at EV companies worldwide, to the best of my knowledge, no EV company is even profitable. And I'm not - to the best of my knowledge, there was no EV division of any company, of any existing auto company that is profitable. So it is notable that Tesla is profitable despite a very challenging automotive environment. And this quarter actually is a record Q3 for us. So we produced our 7 millionth vehicle just yesterday. So congratulations to the teams that made it happen at Tesla. That's a staggeringly immense amount of work to make 7 million cars. So, let's see. And we also have the energy storage business growing rapidly, with strong demand for both Megapack and Powerwall. As people know, on October 10th, we laid out a vision for an autonomous future that I think is very compelling. The Tesla team did a phenomenal job there, giving people an opportunity to experience the future, where you have humanoid robots walking among the crowd, not with a canned video presentation, but literally walking among the crowd, serving drinks and whatnot. And we had 50 autonomous vehicles. There were 20 Cybercabs, but there were an additional 30 Model Ys operating fully autonomously the entire night, carrying thousands of people with no incidents. For those who went there, it's worth emphasizing that these Cybercabs had no steering wheel or brake or accelerator pedals. Meaning, there was no way for anyone to intervene manually even if they wanted to. The whole night went very smoothly. Regarding the vehicle business, we are still on track to deliver more affordable models starting in the first half of 2025. I think people are wondering what they should assume for vehicle sales growth next year. At the risk of taking a bit of a risk here, I want to give some rough estimate: I think it's 20% to 30% vehicle growth next year. Notwithstanding negative external events, like if there's some major force majeure or if interest rates go sky high, we cannot overcome those events. But with our lower-cost vehicles and the advent of autonomy, something like a 20% to 30% growth next year is my best guess. Cybercab reaching volume production in ‘26. I do feel confident about Cybercab reaching volume production in ‘26. Aiming for at least 2 million units a year of Cybercab across multiple factories, maybe 4 million ultimately. These are just my best guesses, but if you ask me, those are my best guesses. The 4680 cell lines, the team is doing great work there. The 4680 is rapidly approaching the point where it is the most competitive. When you consider the fully landed cost of a battery pack in the U.S., net of incentives and duties, the 4680 is tracking to be the most competitive. We're not quite there yet, but we're close to being there, which I think is extremely exciting. We've got several ideas to go well beyond that. If we execute well, the 4680 will be the most cost-competitive cell in North America, a testament to a tremendous amount of hard work by the team. We'll continue to buy a lot of cells from our competitors. Our intent is not to make cells just internally. I don't want to set off any alarm bells here. We're also increasing substantially our vehicle output and our stationary storage output. We need a lot of cells, and most of them will still come from suppliers, but it is some good news that the Tesla internal cell is likely tracking to be the most competitive in the U.S. Regarding autonomy, as people are experiencing in the cars, there are significant improvements in the miles between interventions. With the new version 12.5 release of full self-driving in Cybertruck, we are combining the code into a single stack so that city driving and highway driving are one stack, which is a bigger burden for the highway driving. It's all neural nets. The version 13 of FSD is going out soon. Ashok will elaborate more on that later in the call. We expect to see some roughly a 5 or 6 fold improvement in miles between interventions compared to 12.5. Improvement will likely reach at least three orders of magnitude over the course of the year. The current internal expectation for the Tesla FSD having longer miles between interventions than human is the second quarter of next year. It may end up being the third quarter, but it's extremely likely to happen next year. Ashok, do you want to add anything?

Yeah. Miles between critical interventions is as you mentioned, Elon, we've already made a 100-fold improvement with 12.5 from the start of this year. With version 13 release, we expect to achieve a 1000-fold improvement as we progress with production software. This advancement is due to technology improvements, incorporating higher frame rates and better hardware capabilities. We hope to continue scaling our neural network, data, and training compute. By Q2 next year, we should cross over the average human miles per critical intervention, which we consider collisions in this context.

That's just unveiling our internal estimate.

Yes.

That's not sandbagging or anything else. Our internal estimate is Q2 of next year to be safer than human and to continue with rapid improvements thereafter. A vast majority of humanity has no idea that Teslas drive themselves. Especially for a model 3 or Model Y, they look like normal cars. You don't expect them to be capable of driving themselves. The Cybercab looks different, but the Model Y and Model 3 are good looking cars, but they look fairly normal. We want to expose that to more people. Every time we have a significant improvement in the software, we'll roll out another trial to encourage people to try it again. We are seeing significant improvements in adoption, especially after the 10/10 event. There’s no need to wait for a robo-taxi or Cybercab to experience full autonomy. We expect to achieve that next year with our existing vehicle line.

Actually, Smart Summon gives a small taste of what it's going to look like, the car able to drive itself to the user within private parking lots. Currently, it's speed-limited, but it’s going to be increased quickly. We already have had more than 1 million uses of Smart Summon.

We already offer a ride-hailing capability for Tesla employees in the Bay Area. With the development app, you can request a ride, and it will take you anywhere in the Bay Area. We do have a safety driver for now, but the software required has been developed—David, do you want to elaborate on that?

Yeah. Sure. David, we showed some screenshots of this in the Q1 shareholder deck. This is real. We've been testing it for the better part of the year. The building blocks that we needed to build this functionality and deliver it to production have been in the works for years. We’ve released this functionality to our customers because we built it intending for future use. We've been thoughtful about adding great features for our customers in the meantime, such as synchronizing profiles across cars, so every single car you jump into looks exactly like yours. All the navigation, media, mirror, and seat positions are synchronized. Something you'll need for the ride-hailing app involves seeing progress on routes in the mobile app. This has been released in the meantime—so it's not like we're just starting to think about this now while building out our ride-hailing network. We've been at it for quite some time.

We expect to roll out ride-hailing in California and Texas next year to the public. California has a long regulatory approval process, but we should get approval next year, contingent upon regulations. Texas is a lot faster. We'll definitely have it available in Texas and probably in California. There’s a profound change. Tesla becomes more than a vehicle and battery manufacturing company at that point. We published our Q3 vehicle safety report, showing one impact for every 7 million miles of autopilot, relative to the U.S. average of one crash every 700,000 miles. It currently shows a 10x safety improvement relative to U.S. averages. We continue to expand our AI training capacity to meet the needs of both FSD and Optimus. We're currently not constrained by training compute, which affects the speed at which we can identify mistakes. As we improve our fleet, many miles of data will help refine our systems. Optimus has shown massive improvements in dexterity and movement. Our next-generation hand and forearm, which includes 22 degrees of freedom, is extremely human-like, with better tactile sensing. I can confidently say we have the most advanced humanoid robot by a significant margin. We're also the only company with all the necessary ingredients to scale humanoid robots. Other companies may have impressive demos, but they're missing the AI brain and scaling capacity. I think Optimus will ultimately be the most valuable product, possibly the most valuable product ever made. The energy business is doing exceptionally well, with a gigantic opportunity ahead. The Lathrop Megapack factory reached 200 Megapacks a week, which is now a 40 gigawatt-hour run rate. We have a second factory in Shanghai that will begin with a 20 gigawatt-hour run rate next quarter. Shipping at least 100 gigawatt-hours a year of stationary storage at Tesla seems likely to happen, which must grow to multiple terawatt-hours per year to ensure a sustainable energy future. If you're not at the terawatt scale, you're not really moving the needle. Looking at our last master plan, which I think has too much detail, I'll ask Vaibhav to summarize it. In that plan, we showed it is possible to lead humanity to a fully sustainable energy future using renewable energy generation and storage and electric transport. There are no fundamental material limitations. We have enough raw materials to make civilization fully sustainable, even under increased energy usage. One way to measure a civilization's progress is through the Kardashev scale. We're currently below 1% of that scale. On a Kardashev level 1, we would harness all the power of the planet. To reach level 2, we would need all the energy produced by the sun. In conclusion, Tesla is focused on building the future of energy, transport, robotics, and AI. Others are focused on managing around near-term trends, but we believe our approach is right. If we execute on our objectives, I predict Tesla will become the most valuable company in the world by a long shot. I want to thank the Tesla team for strong execution in a tough operating environment, and we’re looking forward to building an incredibly exciting future. Thank you.

Thank you very much, Elon. And I'll let Vaibhav pass on some more remarks as well.

Thanks. Our Q3 results were positive and once again demonstrate the scale to which our business has evolved, with a generation of record operating cash flows of $6.3 billion. Our automotive revenues grew both quarter-on-quarter and year-on-year. While we had unit volume growth, we did experience a reduction in ASPs, primarily due to financing incentives. We provide these incentives using third-party banks and recognize the cost as an upfront reduction. We released FSD for Cybertruck and other features like Smart Summon, contributing $326 million of revenues in the quarter. We continue to see elevated levels of regular credit sales, with over $2 billion in revenues so far this year. Industrially, China continues to outperform the U.S. and Europe by a factor of three. If there’s a lesson to be learned from that, it signals what’s to come in other regions with the increasing acceptance of EVs. Our focus remains on growing unit volume while avoiding a build-up of inventory. To support this strategy, we continue to offer compelling vehicle financing options in every market. Our vehicles provide much better value compared to other OEMs, particularly considering safety features, performance, and unparalleled software functionalities, including autonomy and parental controls. While every vehicle in our lineup comes with these capabilities, there is an awareness gap with buyers, and even sometimes with existing owners. We plan on making these features more visible in our interactions with customers. Automotive margins improved quarter-over-quarter due to increased volume, but sustaining these margins in Q4 will be challenging given the current economic environment. We remain focused on lowering our cost per vehicle through numerous work streams without compromising customer experience.

A helpful macro trend is if there's a decline in interest rates; this has a massive effect on automotive demand. The vast majority of demand is driven by monthly payments. If interest rates decline, this would help with vehicle affordability.

We observed that the economy impacts affordability; customers are willing to keep their cars longer, especially in the U.S., which affects the entire industry. As discussed, energy deployments fluctuate quarter-over-quarter due to customer readiness and location of orders, not necessarily indicating demand or production. While we did see a decline in Q3, we expect our deployment to grow sequentially in Q4 to end the year with more than double last year's total. Energy margins in Q3 were a record at over 30%, due to the mix of projects deployed in the quarter. Note that there will be fluctuations in margins as we manage deployments and our inventory. Our pipeline and backlog continue to grow quarter-over-quarter as we fill our 2025 production slots, and we’re doing our best to keep up with demand. On the CapEx front, we had about $3.5 billion in the quarter, which was a sequential increase largely because of AI compute investments. We now expect our CapEx for the year to exceed $11 billion. We shared our vision for the future at the recent Real World event, and the Tesla team is hyper-focused on delivering that vision. While we have achieved significant progress this year, it will take time to navigate the complex regulatory landscape. The future is incredibly bright, and I want to thank the Tesla team for all their help.

Thank you very much, Vaibhav. Now we'll go to investor questions. The first one is, is Tesla still on track to deliver the more affordable model next year as mentioned by Elon earlier? How does it align with your AI product roadmap?

Sure. As Elon and Vaibhav both said, we're on plan to meet that in the first half of next year. Our mission has always been to lower the cost of our vehicles to increase the adoption of sustainable energy and transport. Part of this involves lowering the cost of our current vehicles. The next stage is introducing robotaxis, which will make getting into an EV more affordable. This is where we see the convergence of our EV roadmap and AI roadmap.

It will be priced under $30,000, which is a key threshold.

Great. Thank you very much. A similar question next. When can we expect Tesla to give us the $25,000 non-robotaxi regular car model?

We're not breaking it down.

All our vehicles today are road ready.

I think we’ve made it clear; the future is autonomous. It will be blindingly obvious in retrospect that the future is autonomous electric vehicles. Non-autonomous gasoline vehicles in the future will be like riding a horse and using a foot bone. There's still some horses, but they're unusual and niche. Everything is going to shift to electric and autonomous.

Yes. Cost per mile efficiency of that vehicle is what matters. That's what we've focused on with the robotaxi.

The Cybercab is designed to optimize for autonomy. It will cost roughly $25,000. You will be able to buy one exclusively if you want.

Great. Thank you very much. The next question is, what is Tesla doing to alleviate long wait times at service centers?

We aim at solving problems at the source, at the factory, before they affect our customers. We believe the best service is no service. If cars don’t break, that's the best solution.

If the car doesn't break, that's the best outcome.

Exactly. We’re focused on fixing issues remotely or upstream before they affect customers. In Q3 and Q4 of this year, we opened and will open a total of nearly 70 service locations. In North America, we've also significantly expanded the size of each location.

Large service centers have merit because they can specialize labor. It should be more factory-like, where you have dedicated lanes for particular services. This structural advantage allows us to service cars more efficiently than traditional dealerships.

This helps us treat heavy repairs more efficiently, with dedicated lanes for various repairs. We're treating service more like a factory.

This is where Tesla's structural advantage lies, as we make and service our cars. Traditional dealerships have conflicts of interest. We can reduce service costs as we're incentivized to maintain them.

We work on the software side to automate diagnostics, so identifying what needs to be done is more efficient before the car comes in for service. Automating preparation ensures all resources are available for efficient repairs. This ensures the car is ready, that the parts are available, and that the technician is scheduled for the service.

We don’t need to diagnose the car upon arrival most of the time. This is a fundamental technology and structural advantage compared to the rest of the industry.

I think it’s underappreciated just how much capability we've built into our vehicles, except for the Cybertruck, which is more distinctive.

But that's advantageous compared to other car brands. They don't look super futuristic.

Great. Thank you very much. The next question is, please provide an update on the Semi. What will the next stage of growth look like, and when will FSD be ready?

Sure. We are progressing swiftly on the build of the semi factory in our Reno facility. We've completed all major capital expenditures for the program, and we're on track for pilot builds in the second half of next year, with production starting in the first half of 2026 and ramping throughout the year. Demand for the semi is unmatched.

Honestly, I don’t think we will be demand limited.

If you’re considering the total cost of ownership, adopting an electric semi is a no-brainer for fleets, especially given the demand for the semi.

In a world where total costs of operation are key, companies not adopting electric semi trucks will lose out.

Pepsi recently mentioned that their drivers don't want to return to traditional trucks after using the Tesla Semi.

Yes. As soon as we give anyone the electric semi, that is the choice they want to drive.

It's super fun and easy to drive.

It’s powerful. You've probably seen videos of the Tesla Electric Semi easily outperforming diesel trucks.

This performance is beneficial for both the driver and goods, increasing safety by reducing on-road congestion. All deployed semis already have all necessary hardware and cameras for FSD. We're training that small fleet now, and once trained, we can deploy FSD onto that platform.

It will significantly reduce driver fatigue, and with our anti-jackknifing software, it just makes everything better and safer.

Great, guys. Thank you very much. Our next question is, when will Tesla incorporate X and Grok into all Tesla vehicles?

These are relatively small features, but we’re looking to expand what's available on-screen in the car and improve the browser. For Tesla vehicles scheduled for autonomy, it's essential they can do anything; browsing, gaming, or productivity. As the Cybercab doesn’t require a human driver, you can enjoy a personal movie theater experience.

This is why we've been building these functionalities, adding games and media apps to vehicles. It's about creating an engaging experience because autonomy allows users to focus on entertainment.

There are some fun games available. If you haven’t tried it, I encourage you to check out Castle Doombad and Polytopia.

We are constantly exploring new features based on customer requests.

Yes, play Castle Doombad.

Great. Thank you guys very much. The next question is, Elon mentioned unsupervised FSD in California and Texas next year. Does this mean regulators will approve it for all existing Model 3 and 4 vehicles?

No. California has lost regulation, but there’s a pathway. Waymo operates in California, so there are forms and approvals that need to be acquired. I’d be shocked if we don’t receive approval next year, but we lack control over that. I believe we will get approval in California, Texas, and perhaps expand even further by the end of the year.

It's crucial to reiterate that certifying a vehicle federally in the U.S. is based on FMVSS regulations. Our vehicles produced today capable of autonomy meet all those regulations. The limitation is at the state level where autonomous deployment is controlled. Some states have more straightforward processes like Texas, while California may take longer, and other states have yet to establish regulations.

I agree; there should be a federal approval process for autonomous vehicles. It’s been a challenging path for regulation across states.

Regulators have been looking at this since 2017, but it has largely stalled. We would appreciate support in working with regulators.

A national approval for autonomous vehicles is crucial, as some things in the U.S. are regulated on a state-by-state basis, which leads to complications.

Great. Thanks, guys. The next question is about the plan for 2025.

We just talked about it. There's a lot going on. We're working on cheaper models scheduled for release. The amount of work required to produce lower-cost cars is enormous. Reducing the cost by 20% is harder than designing the car and building the whole factory. There should be heroes who achieve this.

We're also excited about the Cybercab design and how we're rethinking car design for high volume production. There’s no other car company attempting what we’re doing.

We plan to make the machine that builds the machine revolutionizing our production process. It's designed to be significantly more efficient than conventional factories.

By 2025, we will have completed our factory upgrades in Shanghai and will continue to increase our storage deployments with Powerwall 3. We'll also expand our supercharging network and onboard more OEMs to our network. The progress on the 4680 cells will continue, and our lithium refinery will start production. There is much going on.

It’s crazy how Tesla is excelling in nearly everything we're undertaking. We’re operating as if we’re numerous companies within one.

Just a few more questions. What is going on with the Tesla Roadster?

Consequently, I want to address our long-suffering Roadster deposit holders. The reason it isn't out yet is that the Roadster is essential to our mission. While we love working on it, we must prioritize aspects that significantly impact our sustainability efforts. Thank you to all our deposit holders; we’re finally making progress on that, finalizing the design, which is going to be spectacular.

Thanks very much. The final question is about how the robotaxi will roll out. Will it start with a Tesla fleet and then allow customers to add theirs on a subscription model, and will Hardware 3 be capable of this?

Regarding Hardware 3, it was easier to progress starting with Hardware 4 due to the model's capabilities. This trend will continue over the next few quarters. Our focus will be on Hardware 4, and then we can backport improvements to Hardware 3. It’s more efficient to do that than to work directly with Hardware 3.

We’re not completely certain, but as mentioned, Hardware 4 has significantly more capability than Hardware 3. There’s uncertainty about whether Hardware 3 will achieve the necessary safety level for unsupervised FSD. If we find that’s the case, we will upgrade those who purchased FSD with Hardware 3 for free. Our design accommodates upgrades, so it will be straightforward to switch the computer.

Great. In the final minutes we have left, we will try to take some analyst questions. The first question is coming from Pierre Ferragu at New Street. Pierre, feel free to unmute yourself.

Thanks a lot, guys, for taking my question. I was curious about the compute you're ramping up. You provided interesting stats on how much compute you currently have and stated you don’t feel constrained. I’m wondering how you're utilizing this additional compute. Are you creating larger models like OpenAI's GPT-4, or are you focused on improving the performance and reliability of existing models?

The nature of real-world AI is different from LLMs in that you deal with a massive amount of context. In Tesla's case, we use multi-camera setups up to nine total with internal cameras. This means we must distill gigabytes of context down to a small number of control outputs, unlike LLMs, which don't typically deal with a huge context at once. We enhance our capabilities with significant training, and seasoned training over time diminishes the workload as tasks become habitual.

As mentioned, we are training large models for greater performance. We also have to extract the most useful data from the vast amounts of training video data we have, which is quite difficult. But overall, we don’t feel constrained by our ability to train this time.

Regarding the second part of your question about safety drivers and rollout, each state has different rules on safety drivers and the required miles before going unsupervised. We are complying with those regulations; safety is our number one priority.

We believe we'll be able to have driverless Teslas during paid rides next year.

Thank you, everyone. That's all the time we have for today. We appreciate your questions, and we look forward to speaking with you next quarter.