So it might potentially, I think it will provide an opportunity for a lot of customers to earn more by lending their car to the fleet than their lease cost to Tesla. So I think it will provide an opportunity for a lot of customers to earn more by lending their car to the fleet than their lease cost to Tesla.

Good afternoon, everyone, and welcome to Tesla's fourth quarter 2025 Q&A webcast. My name is Travis Axrod, head of investor relations, and I'm joined today by Elon Musk, Vebav Taneja, and a number of other executives. 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. Before we jump into Q&A, Elon has some opening remarks.

We've updated the Tesla mission to amazing abundance. This is intended to send a message of optimism about the future, most likely headed to an exciting, amazing era of abundance. And I think with the advent or with the continued growth of AI and robotics, I think we actually are headed to a future of universal high income, not universal basic income, but universal high income. I mean, there's going to be a lot of change along the way, but that is what I see as the most likely outcome. So it makes sense to update Tesla's mission to reflect that goal. and obviously along that way we're going to keep improving safety driving down the cost of goods and getting people access to anything they need without compromise still making sure that the environment is great nature is great and people can have whatever they want which seems like probably the best future i'm open to other ideas but that sounds like it sounds like it sounds like if you could say what is the best future you could possibly imagine i guess it would be that everyone can have whatever they want including amazing medical care i think that's probably the best outcome we're seeing obviously the first steps along that way this year for tesla as we increase vehicle autonomy and begin to produce Optimus robots at scale. We're making very big investments so this is going to be a very big CapEx year that is deliberate because we're making big investments for an epic future. I think all these investments make a lot of sense. We'll continue to make sure that when we do spend capital it is spent very efficiently. Major investments in batteries and the entire supply chain of batteries. We're also going to be significant manufacturers of solar cells and we're making massive investments in AI chips. But I think these all make a ton of strategic sense. And then I guess I have like, it's not exactly bad news. It's time to basically bring the Model S and X programs to an end with an honorable discharge because we're really moving into a future that is based on autonomy. So if you're interested in buying a Model S and X, now would be the time to order it. We expect to wind down S and X production next quarter, basically start production of Model S and X next quarter. We'll obviously continue to support the Model S and X programs for as long as people have the vehicles. We're going to take the Model S and production space in our Fremont factory and convert that into an Optimus factory. The long-term goal of having a million units a year of Optimus robots in the current SX space in Fremont. It is time to bring the SX programs to an end. As my profile picture on X said for a few months there, the future is autonomous. With respect to full self-driving and robotaxi, people are obviously following with very close attention the progress of FSD, and you can experience it for yourself. If you've got a Tesla, with every software update, the car gets better and better at autonomy. We're able to do our first rides with no safety monitor in the car in Austin. These are paid rides. So these are just sort of randomly selected paid rides with no safety monitor. Maybe as of yesterday or so, we don't even have a chase car or anything like that. So these are just cars with no people in them and no one's following the car in Austin. So we obviously are being very cautious about this because we want to have no injuries or serious accidents along the way. So I think it makes sense to be very cautious. You'll see the amount of autonomy increase dramatically, I think, every month, essentially. There will also be an opportunity, something we've talked about for a long time, for existing owners of Teslas to add or subtract their cars to the fleet, kind of like how Airbnb works, where you can add or subtract your house to the Airbnb inventory. And I think probably the value of the people adding or subtracting their cars to Tesla autonomous fleet is probably a little underweighted by a lot of people because we've got millions of cars with AI4 that can do this. So I think it will provide an opportunity for a lot of customers to earn more by lending their car to the fleet than their lease cost to Tesla. In that scenario, you basically get paid to own a Tesla. It's quite a good scenario. We expect to have fully autonomous vehicles in somewhere between a quarter and half of the United States by the end of the year, pending regulatory approval. A big factor would be if there's some kind of federal preemption for autonomous vehicles. In the absence of that, you kind of have to go on a city-by-city or state-by-state basis. But nonetheless, even if it is city-by-city, state-by-state, we expect to be in dozens of major cities by the end of the year. With respect to energy, the Tesla energy team has done incredible work. The growth rate on that is continuing to be very strong. We're building more manufacturing capacity and expect that energy will will have very high growth for as far into the future as we can imagine the solar opportunity is underestimated the best way to add significant capability to the grid powering ai data centers is solar and batteries on earth and solar in space that's why we're going to work towards getting 100 gigawatts a year of solar cell production integrating across the entire supply chain from raw materials all the way to finished solar panels more about optimus we'll probably unveil optimus three in a few months. It's going to be quite surprising to people. It's an incredibly capable robot. And as I mentioned, we are replacing the SX line in Fremont with a million unit per year line of Optimus. Now, because it is a completely new supply chain, there's really nothing from the existing supply chain in Optimus. Everything is designed from physics first principles. The normal S-curve of manufacturing ramp will be longer for Optimus than it is for products that have at least some portion of an existing supply chain. Like when everything's new, production rate will be proportionate to the least lucky, least confident part of the entire supply chain. And if there's 10,000 things that need to go right, it only takes one to lag that. I'm confident that we'll get to a million units a year of Optimus 3. Optimus 3 really will be a general purpose robot that can learn by observing human behavior. So you can like demonstrate a task or verbally describe a task or show it a task, even show it a video, and it will be able do that task. It's going to be a very capable robot. Long-term optimists will have very significant impact on the US GDP. Like it will actually move the needle on US GDP significantly. You know, there's still obviously many who doubt our ambitions for creating amazing abundance, but we're confident it can be done and that we're making the right moves technologically to ensure that it does. Tesla's obviously not, never been a company to shy away from solving some of the hardest problems. I think that's kind of how you build value in a company is you solve hard problems. It's like, I don't know how you create value by solving easy problems. So thank you to everyone who is supporting this mission. The future is more exciting than you can imagine. Thank you so much, Elon.

And next we have remarks from Vebov.

Q4 25 was an interesting quarter in a couple of respects. On the auto's front, while in Q3, we saw a surge in U.S. demand before the IRA consumer credit cliff, pulling in some demand from Q4. In other parts of the world, we saw increase in demand leading to record deliveries in smaller countries like Malaysia, Norway, Poland, Saudi Arabia, and Taiwan, while continued strength in the rest of AIPAC and EMEA. We therefore ended 2025 with a bigger backlog than in recent years. None of these countries have the latest version of FSD supervised available yet. On the storage front, we hit yet another record in terms of deployments. On the automotive margins front, automotive margins excluding credits improved sequentially from 15.4 to 17.9%. The automotive gross profit was flat sequentially despite 16% lower deliveries, primarily due to regional mix as we had proportionately more deliveries in APAC and EMEA. As we look to 2026, with the progress that has been made with autonomy, our focus is on ramping production at all our factories. Our biggest constraint globally continues to be on the battery pack front while our teams have been creative in trying to resolve the situation by now putting 4680 cells in non-structural packs we continue to iterate improving things from here on FSD adaption continued to improve in the quarter reaching nearly 1.1 million paid customers globally of these nearly 70% were upfront purchases it is important to note beginning this quarter we are transitioning fully to a subscription based model for FSD. Therefore, net additions to this figure will primarily be via subscription model and in the short term will impact automotive margins. On the energy front, we achieved yet another record in terms of gross profit for the quarter and ended the year with nearly $12.8 billion in revenue, a 26.6% year-over-year growth. This was the result of high deployments in all regions and continued strength and demand for both Megapack and Powerwall. As we look at 2026, our backlog remains strong, well diversified globally, and we expect increasing deployments with the launch of Megapack 3 and Megablock. However, we expect margin compression from the increased low-cost competition, impacts to market from policy uncertainty, and the cost of tariffs. Services and others margin declined from 10.5% to 8.8% primarily from higher employee related costs for service centers as we start preparing for the ramp in activity from the growth in the fleet size. We did see an improvement in margin from our supercharging business which is included within services and other. Additionally note that our robotaxi business related costs while not material are also included within this. Given that this we're still in the early phase of our fleet deployment and are still doing a lot of validation testing the revenue and cost per mile metrics are not meaningful to discuss at the moment then on cross margin front you know we ended the quarter with over twenty point one percent something which we haven't achieved for over the last two years this improvement came despite the impact of lower fixed cost absorption and the impact of tariffs which were in excess of five hundred million in Q4 Operating expenses increased sequentially, primarily from increased stock-based compensation for employees and as we started recording charges on one operational milestone under our 2025 CEO Performance Award that was deemed to be probable over the award term. Additionally, our spend on AI-related initiatives and new products like CyberCab, Semi, Optimus, and MegaPract, etc. continues to be on elevated levels and we expect this trend to continue for the full year 2026 net income was negatively impacted from mark to market charges on a bitcoin holding which depreciated 23 as compared to the last quarter and the impact of unfavorable impact of effects primarily from our large intercompany borings on the free cash flow front we ended up at 1.4 billion you know we did end up capex being slightly below our previous guidance of 9 billion this year is going to be a huge investment year from a capex perspective at the moment we are expecting that capex would be in excess of 20 billion you know we'll be paying for six factories namely the refinery lfp factory cyber cab semi a new mega factory the optimus factory on top of it we'll also be spending money for building our ai compute infrastructure and we'll continue investing in our existing factories to build more capacity and will also further expand our fleet of robotaxi and optimus while this may seem a lot we believe this is the right strategy to position the company for the next era and we'll make such investments as you know mentioned in a very capital efficient manner note that this does not include potential investments in solar cell manufacturing or our tariff fab as we're still in early phase and we plan to provide an update in future quarters We're starting not the next chapter, but a new book on the progression of this company. While at times it feels daunting, it is going to be the most exciting change in Tesla's history, and we could not have even dreamed of embarking on this journey without the support of our customers and our investors. Thanks for again showing the confidence in us, and let's get ready for a future of amazing abundance.

Now, we're going to head over to investor questions. As always, we will start with questions from say.com. The first question is, today there are approximately 90 million cars sold globally each year. Does Tesla have a view, based on its robo-taxi ambition, what this number will be in five or ten years? And how does this impact Tesla's EV strategy to have more models?

As Elon said, the future is autonomous. And obviously, autonomy and cyber cab are going to change the global market size and mix quite significantly. I think that's quite obvious. You know, general transportation is going to be better served by autonomy as it will be safer and cheaper. And over 90% of vehicle miles traveled are with two or less passengers now, which is why we designed CyberCab that way. In this new autonomous market, we at Tesla have the advantage of efficiency, costs, and manufacturing at scale that really no one else has. And we've built that over the last decades. And we believe that that segment that we are creating will grow millions year over year.

Just to add to what Lars said there, the point that Lars made, which is that 90% of miles driven all with one or two passengers, or one or two occupants, essentially, is a very important one. That implies that the cyber cab, which is a dedicated robot taxi, it's a little confusing with the terms robot taxi and cyber cab. Sorry about the confusion. And in fact, in some states, we're not allowed to use the word cab or taxi. So it's going to get even more strange. It's going to be like cyber vehicle or something, cyber car. The cyber cab, which is a specific vehicle model that we're making, does not have a steering wheel or pedals. So this is clearly, there's no fallback mechanism here. It's like this car either drives itself or it does not drive. And we expect to start production in April. As always, production rate is an S-curve, so it starts off very slowly and then grows exponentially. Then you hit the linear and then ultimately asymptotes at whatever your target volume is. We would expect over time to make far more cybercabs than all of our other vehicles combined. Given that 90% of distance driven is one or two people, I think it's like 80% is just one. So long-term cybercab would make several times more cybercabs per year than all of our other vehicles combined.

The next question, are there still plans to launch new models to address different price segments and vehicle types, which could materially expand the TAM for Tesla?

To further on what we were just talking about, we've launched our least expensive models ever over the last few months and are continuing to expand those models globally. And over the last decade, we have continually brought down the cost of our vehicles without sacrificing range, performance, or premiumness. And we'll continue to do that, as Vybov said, investing in our factories. But these are all trade-offs of where we spend our time or money. With CyberCab coming, we are aiming to bring that Tesla premium ride experience to our largest market yet. That could be five or ten times our current levels of production. This new autonomous market, you have to start thinking about us as moving to providing transportation as a service more than the total addressable market for the purchased vehicles alone. Of course, we do have plans to have robo-taxis in various shapes and sizes, but obviously CyberCab will be the grand majority of that volume.

Yeah, the vast majority of miles traveled will be autonomous in the future. Probably less than 5% of miles driven won't be where somebody's actually driving the car themselves in the future, maybe as low as 1%.

The next question is, historically, Tesla has spoken about gross margin per model. Are there standalone gross margin targets for the current models, excluding the benefits for FSD sales?

We've talked about this with the previous two questions, but transportation, as we know, is changing. it has to be looked at it more holistically in autonomy software will be the driver for growth from now and as we aim to maximize the global feed we have been laser focused on cocks from our side because that is something which we manage so we will keep focusing on that but I think we need to look at it

from a different dimension yeah like this cyber cab that is the whole design of cyber cab was to optimize the fully considered cost per mile of autonomous driving. It's a different design problem than if you're trying to design cars for people who will be driving versus being driven. Minimum cost per mile and also for a much higher duty cycle. You would expect the cyber cab to be used probably 50 or 60 hours a week instead of the 10 or 11 hours a week that a driven vehicle is used. Typically people might drive their car for an hour and a half a day on average so it's like 10 hours per week out of 168. I think an autonomous vehicle is likely to be used probably five times as often, which means that you need to design the vehicle for a much more wear and tear per unit of time and much more resilience. It's more like a commercial truck. Continuous operation or close continuous operation is how you design an autonomous vehicle. We will have larger vehicles in the cyber cab in the future that are designed for full autonomy. We've actually shown pictures of this and in fact have shown prototypes. So this is not exactly a secret. We've given people rides in them. So we're not hiding this light under a bushel here. It's like we're literally saying what we're going to do and have said what we're going to do for a while. I think long term, really the only vehicles that we'll make will be autonomous vehicles, with the exception of the next generation Roadster, which we're hoping to debut in April. It's going to be something out of this world. The next question we unfortunately

have to skip because it's not related to Tesla and we would like to remind folks who use the say platform to please focus these questions on Tesla with that in mind we're going to move on to the next question what is the current bottleneck to increase the robotaxi deployment and personal use unsupervised FSD is it the safety and performance of the most recent models or is it people to monitor the robotaxis in car or remotely or is there some other locker we have scale

the robot taxi service that's available to customers over the last year in order to just learn the scaling problems without having to wait for the unsupervised. Basically, there are two goals. One is to learn as much as possible from the fleet with the safety monitors. And secondly, be laser focused with the engineering team to solve the unsupervised FSD problem. We had a long tail of issues that we were able to churn through. And then in the last couple of weeks, we had started our unsupervised robot taxi service to public customers in Austin. I think some customers took rights last week and also the service continues today without any rear car or something like that separately we did scale the fleet size in the bay area and in austin and through that we learned you know issues with charging and other issues that we would have seen once we thought of like scale the unsupervised fleet so both are happening in parallel a variant of the software that's used for the robot taxi service was shipped to customers with v14 customers saw a huge jump in performance like a lot of happy feedback from customers since then we have improved the software significantly as well. And customers will continue to see with their own software releases that the software is so good that screaming to remove the driver monitoring software because they're bored

inside the car too much. You know, we're using our vast network of charging and service centers that really only Tesla has in this space to jumpstart our infrastructure build-out needs to get ahead of robotaxi autonomous vehicle demand. And we expect that because of this network, we are the only company capable of scaling at the rate that is needed for the tsunami of autonomy that is coming.

Moving on to the next question. After the unveil of the Cybertruck, Elon stated that if it didn't sell well, Tesla would build a more conventional-looking pickup. How practical would it be to create this new design on the Cybertruck architecture, and could it be conveniently built on the existing production lines?

Actually, in its segment, Cybertruck continues to be a leader and is selling more than any other electric truck out there. But to the question itself, from a line standpoint, we always design our lines to be super flexible. We built 3&Y on the same line. We built SNX on the same line still, showing that we can do that. The Cybertruck line was designed in the same way and is one of our most fully ready for autonomy platforms.

We will transition the Cybertruck line to just a fully autonomous line. There's obviously a market there for cargo delivery, like you say, like localized cargo delivery within a city, within a few hundred miles, something like that. There's a lot of cargo that needs to move locally within a city, and an autonomous Cybertruck could be very useful for that.

Great. Moving on to the next question. Regarding Optimus, could you share the current number of units deployed in Tesla factories and actively performing production tasks? What specific roles or operations are they handling, and how has their integration impacted factory efficiency or output?

Yeah, we're still very much at the early stages of Optimus. It's still in the R&D phase. We have had Optimus do some basic tasks in the factory, but as we iterate our new versions of Optimus, we deprecate the old versions. It's not in usage in our factories in a material way. It's more so that the robot can learn. We wouldn't expect to have any kind of significant Optimus production volume until probably the end of this year.

Optimus Gen 3 is an awesome robot that minimizes any differences. It basically looks like a human. People could be easily confused that it's a human. And this helps our strategy for the AI too because you can learn from how humans do these tasks. And it's very easy to teach the robot to do in the same way.

You know, there's a lot of news of like various companies announcing layoffs and whatnot. But at our Tesla factory in Fremont, we actually expect to increase headcount over time and to significantly increase output from our factories. We don't have any layout plans. We expect to actually increase headcount.

Great. The next question, similar to the other autonomy questions, but slightly different. When is FSD going to be 100% unsupervised?

Well, it is 100% unsupervised. And FSD is 100% unsupervised. I mean, we obviously have cars operating with no one in them and no safety monitor and no follow car or anything like that. You know, we're being just very cautious with the rollout. I mean, with each successive version, as we prove it out, we make sure that there are no sort of unique issues in particular cities. Because like sometimes you get like some very, you know, difficult intersection and it'll be an intersection where a lot of humans have accidents, by the way. There's like some nutty intersections where a lot of humans make mistakes and have accidents in various cities. FSD can handle those unusual intersections. Like if you take LA, for example, where Wilshire and Santa Monica combine is like there's about, I don't know, 20 traffic lights and people are constantly having accidents there. You want to make sure that FSD can handle unique things in a particular city. But with each successful release of FSD, we will reduce the amount of driver monitoring that's needed proportionate to the safety of the FSD build.

Great. As it relates to RoboTaxi, what has surprised you about the rollout so far? We've talked about what's constrained the fleet expansion to date, but it appears there are 200 vehicles based on public tracking. Is that something that we can confirm?

I wouldn't say there's anything that really surprised us because we had a large fleet. We had all the metrics. So there was no sort of a surprise. It was just continued work to grind down on the long tail of issues. And that's what enabled us to launch the unsupervised service in Austin.

I think we're well over 500 at this point between the Bay Area and Austin.

Yeah, varying amounts of like vehicles depending on the load. But yeah, you can have like more vehicles during like peak times and then like fewer vehicles in the off hours.

This will probably, you know, double every month type of thing. It's going to, it's on an exponential curve.

You know, we've been deliberate on all this in the sense that we have the supporting infrastructure already been in place, whether it's service centers, charging. Yes, we'll have to augment as the fleet grows, depending upon the density of where the demand is and whatnot. It's not something like we just stumbled upon it and we're starting to. We've been at it for years. Yes, not every city is designed the same way. Our infrastructure is also not the same in every city, but you have to give us credit that it's been a journey. Like Lars said, if there's some company which can do it, we've already been at it, so we

should be able to deliver much better great so moving on to the last question Elon you've been spending significant personal time on Tesla's chip design yeah what was the forcing function behind this increased involvement and do you think external chip sales will represent a significant portion of Tesla's valuation by the end of the decade I tend to spend time on wherever

whatever the most critical issue is for the company and completing the AI five trip design and having it be a great chip it's arguably number the number one most critical thing to get done, which is why I'm spending more time on that than currently anything else at Tesla. Spend pretty much every Saturday on this and chunk of every Tuesday. So it's like spending my Saturdays on something. It's going to be something pretty important. I do think AI-5 will be a very good chip. Quite confident about the design at this point. And then AI-6, which will follow that in under a year, will be yet another big leap beyond AI-5. But in terms of selling it outside of Tesla, we first need to make sure we have enough chips for all of our vehicle production and all of our Optimus production and then we will actually use the AI-5 chips in our data centers. We already use the AI-4 chips in our data centers so when we do training it's a combination of the AI-4 chips and NVIDIA hardware. But you said by the end of the decade I mean things are changing so fast that it's hard to imagine like what happens at the end of the decade. When I look ahead at say what what's the limiting factor for Tesla growth three or four years out I think it actually is chip production. Is there enough AI logic and enough memory, enough RAM for our volume? Right now, I see that as being the thing that probably limits our growth, which would imply that we're not selling chips outside of Tesla because we need them. I think it's going to make sense. And this is definitely going to be a sort of a controversial thing, but I think Tesla needs to build a terafab. And I mentioned this at the childhood meeting, even when we look at the output of the best case output of all of our key suppliers, and I'd say even beyond suppliers, they're like strategic partners like Samsung, TSMC, and Micron. And we say, like, what's the most you could possibly make? Then it's not enough. So I think in order to remove the constraint, the probable constraint in three or four years, we're going to have to build a Tesla TeraFab, a very big fab that includes logic, memory, and packaging. That's actually also going to be very important to ensure that we are protected against any geopolitical risks. I think people may be underweighting some of the geopolitical risks that are a major factor in a few years. You know, a lot of people will say, like, that's crazy. Favs are really hard. I'm like, yes, I know favs are really hard. I don't think they're easy. We do hard things. We do a lot of hard things. You know, we didn't used to have car factories. We didn't used to have battery cell factories or lithium refineries or, you know, mega pack factories. We figured it out. But I think if we don't do the Tesla TeraFab, we're going to be limited by supplier output of chips. And I think maybe memory is an even bigger limiter than AI logic. We have chip supply deals with TSMC in Arizona and Samsung in Texas, but currently there are no advanced memory fabs at scale in the United States. They're zero, literally zero. Hopefully, Micron will have something going in a few years, headquartered in Idaho, where they make a lot of potato chips, where they need to make computer chips too. Anyway, we're working with our strategic partners on the chip front, memory and logic. But I think we've got to also try our hand at building a large-scale fab that integrates logic memory and packaging. And if we don't do that, we're just going to be fundamentally limited by supply chain. We'll have a bigger announcement on this in the future.

With that, we're going to move on to analyst questions. The first analyst is Emmanuel from

Wolf Research. My first question is on the CapEx. You signal a pretty large increase to over $20 billion dollars for this year was hoping to better understand where the investments are going any way to dimension for us which of the product line or technologies account for the bulk of the increase and also you view this as like one time in nature 2026 or i guess how much of this is an ongoing level of high spending for for a number of years and then just finally still on that with that level of spending you're going to be burning cash how should we think about cash balance or or any other way to finance this?

There's about six factories which we are starting production in this year. So there's a lot of cash, CapEx, which is going into that. Then as we are trying to scale Optimus, we need a lot more compute. So we're putting more money towards compute as well. We're also gonna be spending money to expand the capacity existing factories. On top of it, just keep in mind that we're not, none of these numbers, which i shared of 20 billion factors in anything to do with solar fab or the semiconductor chip fab those would be as elon mentioned would come later on you think uh your second part of your question was is this one-off or would we expect more i think we're getting into this investment phase because we have big aspirations and when you look at it some of these aspirations are i call them as infrastructure play especially if you have to do a chip fab and we have to do a solar cell manufacturing fab those are infrastructure plays that funding takes a little bit longer you would be in an investment cycle for a little bit longer initially third part of your question was how are we going to fund it initially obviously we have over 44 billion of cash and investments on the books so we'll use our internal resources but there are ways where we can fund it especially when we look at the robotaxi fleet because anytime you have a consistent stream of cash flow you can go and get money from the banks and we have had conversations with banks about it that is something how we're going to do it and then on the infrastructure play side we don't have a number yet it's an infrastructure play it's a longer tail we will have to look at a little bit more

in terms of how we fund it great our next question comes from andrew from morgan stanley

I just want to start on the XAI investment that you guys announced today. You talked about there being some collaboration between the companies. So I'm just hoping to get more information or if you're hoping you could shed more light on what that looks like and maybe how the work XAI is doing can be leveraged at Tesla and vice versa.

If you looked at the disclosure, which we also put in there, we do talk about this is literally a furtherance of our master plan for. even today if you look at Tesla vehicles we are using grok in there as we look at whether we can do it ourselves yes there are a lot of things which we can do ourselves but if there are things which XCI can help accelerate our progress then why should we not do that and that is the reason why we've gone ahead with such an investment because this is part of the strategic initiative if you remember I talked about how many things which we're doing ourselves if there are ways and means we can find efficient ways for others to help us and xai literally fits into

that mold so that's why we went ahead with it we just had like a lot of investors uh ask us to do this as there was like a lot of you know investor but as a shareholders said like we should invest in xai so that's like we're just doing what shareholders like asked us to do pretty much grok will be very helpful in say maximizing the efficiency of the management of the of a large autonomous fleet. So, I mean, if you've got an autonomous fleet that's in the future 10 million vehicles or tens of millions of vehicles, then optimizing the efficient use of that fleet, Grok, will be way better than any heuristic solution or sort of manually managed solution. And if you say managing a large team of Optimus robots to build a factory or build a refinery, you know, and this is a hypothetical example, a rare earth ore refinery, which we do desperately need in America. You say, well, like, what's going to organize the Optimus robots to build that ore refinery? You kind of need an orchestra conductor. And so then Grok would be kind of the orchestra conductor for the Optimus robots to build the, hypothetically, and it might not be hypothetical in the future. I'm just saying it's not currently on our plans.

Ready. We're going to move on to the next question, which is coming from Dan Levi at Barclays.

Elon, you talked about some of the constraints on memory. Given the very tight supply, are there any near-term constraints on procuring memory? And if there are, to what extent could you look at modifying the functionality in the vehicle similar to what you did in 21 when we saw shortages on MCUs? And maybe how are you thinking about bridging in the next few years?

The Tesla AI is very compute efficient and very memory efficient. So I think one of the metrics one to consider for any given AI model is the intelligence per gigabyte, especially when you're constrained on RAM, having an AI that has very high intelligence density per gigabyte. Given number of gigabytes, how much functionality can you get out of it? I actually think Tesla is ahead of the rest of the world in intelligence density of AI by an order of magnitude or more. This is going to sound like a pretty bold statement, but I kind of know what the intelligence efficiency of the big models are like Gronk and a bunch of the other models. And Tesla's AI is like, in terms of its memory efficiency, more than an order of magnitude better. So that puts us in a pretty good position, actually, for scaling. And we do have a solution for logic and memory for, let's say, roughly three years. But if you start going beyond three years and we look at the scaling plans and how many fabs are getting built, And especially if you factor in geopolitical uncertainty, there's always risk that maybe those chips don't arrive. That's why I think we need to have more fab capacity in the U.S. Just in case, this is really existential for Tesla. You know, Optimus is completely useless without an AI chip. You know, at least the cars we can put steering wheels and pedals in or retrofit them if need be. But Optimus is just a mannequin without, you know, it's like the Tin Man or whatever, from the Wizard of Oz. But even worse, at least the Tin Man could walk. Optimus won't even be able to just sit there without an HF. So we've got a good solution for a significant scale for the next roughly three years. Beyond that, we will be supplier limited. And so we've got to figure out some game plan to not be supplier limited.

Great. Our next question is going to come from George Icanicord.

I've been a surge of startups, particularly from China, entering the humanoid market and wondering what the long-term competitive advantages that keep Tesla ahead are and how, based on what you've seen, will Optimus fundamentally differ from these competitors?

Well, I do think that by far the biggest competition for humanoid robots will be from China. China is incredibly good at scaling, manufacturing, actually quite good at AI, as you can see from the models that China is distributing for free, actually quite good, and they keep getting better. So China is very good at AI, very good at manufacturing, and will definitely be the toughest competition for Tesla. To the best of our knowledge, we don't see any significant competitors outside of China, but China will definitely be tough competition. There's no two ways about it. I always think like people outside of China can underestimate China. China's an ass-kicker next level. We think Optimus will be much more capable than any robot that we are aware of under development. So we think we'll be ahead in terms of the real-world intelligence, the electromechanical dexterity, especially the hand design. In fact, I'd say there's really three hard things about humanoid robots. The building an incredible hand that has the same degrees of freedom and dexterity as a human hand is an incredibly difficult engineering challenge. Then there's the real world AI and scaling production. Those are the three hardest problems by far for humanoid robots. Tesla is the only company that actually has all three of those components.

And our last question is going to come from Colin at Oppenheimer.

Guys, you know, you talked a lot about the CapEx spend, but an incredibly ambitious technology development program that you're talking about. Can you talk a little bit about the R&D spend and how you're thinking about the synergies of the different components, you know, particularly on the hardware side? You know, if you think about, you know, batteries into into chips, into memory and the efficiency of the system and what sort of advantages you think you'll end up getting out of some of these purpose built devices that you'll end up integrating into multiple end markets.

Really, all we're trying to do is make sure that we can scale to very high volume with autonomous vehicles, with human robots, and that we address geopolitical risk. There's so many companies out there that are asleep with the switch with regard to geopolitical risk, where they just have their head in the sand and hope nothing bad will I'm way more paranoid than that. I always think of Andy Grove's famous statement, only the paranoid survive. And why did he come up with that statement at Intel? There's a lot of wisdom in that statement. So we're going to be paranoid and make sure that we can continue to build batteries and robots and AI chips, no matter what happens. And companies that don't do that, a bunch of them will cease to exist.

Remember, all this comes out of necessity. It's not that we want to do it. It's just we have no choice.

Yeah, I mean, we built the most advanced lithium refinery in the world. Like our lithium refinery in Corpus Christi is not just a copy of what others have done. It's an entirely new process that is fundamentally more efficient and more advanced than anything else in the world. the same is true of our cathode refinery here in austin we wish others would build this can other people please for the love of god the name of all that is holy can others please build this

stuff it's not the first time exactly i mean this is not the first time you've said something like this like why do we have to build these things why can others not also please can someone else

pull these things it's very hard to build these things and we build them out of desperation not because nobody else is building lithium refineries and cathode refineries we're pretty much not just largest but also the only lithium refinery and cathode refinery in america we're making moves to make sure that no matter what happens tesla will prosper great unfortunately that's all the

time we have for q a today we really appreciate everyone's questions and we look forward to talking to you next quarter thank you very much and goodbye