Earnings Call Transcript
Tesla, Inc. (TSLA)
Earnings Call Transcript - TSLA Q4 2024
Operator, Operator
Good afternoon, everyone and welcome to Tesla's Fourth Quarter 2024 Q&A Webcast. My name is Travis Axelrod, the Head of Investor Relations here at Tesla, and I am joined today by Elon Musk and Vaibhav Taneja and a number of other executives. Our Q4 results were announced at about 3.00 p.m. Central Time in the update deck we published at the same link as this webcast. During 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?
Elon Musk, CEO
Thank you. To summarize, in the fourth quarter, we achieved a record annualized vehicle delivery rate of nearly 2 million. Congratulations to the Tesla team for their outstanding efforts in reaching record production and deliveries. The Model Y was not only the best-selling electric vehicle but the best-selling vehicle overall for 2024, which is worth mentioning. We are focused on maximizing production and are significantly investing in autonomy, which is advancing at an incredible pace. We've invested heavily in manufacturing AI and robotics this year, which will yield significant benefits in the future. I firmly believe there is a viable path for Tesla to become the most valuable company globally. This vision is largely driven by our efforts in autonomous vehicles and humanoid robots. Our groundwork for this development is underway and will continue into 2025, laying the foundation for what I expect to be an extraordinary 2026, and exceptional years in 2027 and 2028. Not many people fully grasp the value of Full Self Driving (FSD) and our ability to capitalize on our fleet. While some may view my statements with skepticism, I can assure you that we are on the brink of significant advancements in autonomy. It's important to try the technology to truly understand its potential. Once a vehicle becomes autonomous, its usage could increase dramatically beyond the typical hours it is utilized now. This could lead to a massive increase in asset value, potentially unprecedented in history. The reality of autonomy is here, and I encourage anyone who doubts it to experience it for themselves. Currently, our main constraint is battery packs, but we are working to address this issue, and I believe next year will see substantial growth. Our latest Vehicle Safety Report shows marked year-over-year improvements in safety metrics, with significant differences in performance when Full Self Driving is activated. We are also expanding our training infrastructure to enhance FSD development and anticipate considerable advancements with the upcoming Version 14. Optimus, our humanoid robot, presents exciting possibilities for a multitude of uses, far exceeding those of a vehicle. Training requirements for Optimus are extensive, but we are committed to building a sophisticated humanoid robot that could generate substantial revenue in the long run. The demand for battery storage is also on the rise, as energy output will increase significantly with the addition of storage capabilities, leading to unprecedented demand for both mobile and stationary battery packs. In conclusion, 2025 will be pivotal for Tesla, particularly with the launch of unsupervised Full Self Driving, which I believe will become a landmark moment in our history. Tesla is unparalleled in real-world AI capabilities, and the gap to competitors is vast.
Operator, Operator
Great. Thank you very much, Elon. And, Vaibhav has some opening remarks as well.
Vaibhav Taneja, CFO
I will discuss topics related to our operations on Earth. As mentioned, in the fourth quarter, we achieved record vehicle deliveries and energy storage deployments despite a challenging macroeconomic environment. We successfully increased both auto and energy storage volumes on a sequential and year-over-year basis. I want to express my gratitude to everyone at Tesla for their hard work and our customers for their support in reaching this milestone. Our goal entering the fourth quarter was to lower inventory levels in the automotive sector, which we accomplished by finishing the quarter with the lowest finished goods inventory in two years. This was achieved through attractive financing options and various discounts, which affected average selling prices. While we experienced volume growth in nearly all regions where we operate, we reached a new delivery record in the Greater China market, which is promising given the highly competitive battery electric vehicle market. In terms of automotive margins, we observed a quarter-over-quarter decline mainly due to lower average selling prices and the recognition of full self-driving revenue linked to feature releases in the third quarter. Our efforts to reduce costs are ongoing, and we managed to lower our overall cost per vehicle to below $35,000, primarily due to material costs. This occurred despite increased depreciation and other expenses as we prepare for the transition to the new Model Y, for which we recently began taking orders globally. All our factories are set to start producing the new Model Y next month. While we are confident in our team's ability to ramp up production efficiently, we acknowledge that this unprecedented changeover involves updating all factories simultaneously, which will lead to several weeks of lost production during the quarter. Consequently, margins will be affected due to idle capacity and other ramp-related costs, a common occurrence during new launches, but these challenges will be overcome as production is scaled up. We plan to introduce a variety of new products throughout 2025 and remain on track to launch a more affordable model in the first half of 2025, continuing to expand our lineup thereafter. We believe that, in terms of value, our current product lineup is the most compelling in the industry and will only improve. All our products come equipped with the best software and autonomy features available today, with the capability for full autonomy in the future. Despite providing a premium experience, the total cost of ownership remains competitive with mass-market, less premium alternatives. Energy storage deployments reached a record high in the fourth quarter, although there was a sequential decline. Growth primarily came from Megapack and Powerwall, both of which remain supply constrained. As mentioned, we are working to increase production, with the Megafactory in Shanghai coming online this quarter. We expect quarterly deployments to fluctuate but anticipate at least 50% year-over-year growth in deployments for 2025. Gross profit and margins in our service and other segment increased year-over-year but decreased sequentially, driven by higher service center costs and reduced profitability from the used car market. The services within this segment mainly support our new car business, impacting total cost of ownership. As a result, while we aim to maintain positive margins in this area, we don't expect them to match the margins of our core business. There is significant uncertainty regarding tariffs. Over the years, we have aimed to localize our supply chain in every market, but we still depend on components sourced globally for our operations. Thus, the implementation of tariffs, which seems likely, will affect our business and profitability. Our operating expenses rose both year-over-year and sequentially, primarily due to increased R&D spending as we invest in AI-related projects. The remaining increase stemmed from expanding our sales and marketing capabilities through our referral program. For 2025, we anticipate an increase in operating expenses to support our growth initiatives. It's worth noting that our net income in the fourth quarter was influenced by a $600 million mark-to-market benefit from Bitcoin due to new accounting standards for digital assets, which will allow us to record mark-to-market adjustments through other income in each reporting period going forward. We generated $2 billion in free cash flow for the quarter. Despite capital expenditures exceeding $2.4 billion in 2024, we achieved free cash flow of $3.6 billion for the year. We are highly focused on capital expenditure efficiency. Although we have invested in AI initiatives, we have done so strategically to maximize immediate benefits. The development of Cortex was expedited to facilitate the rollout of Full Self-Driving Version 13. Cumulatively, our AI-related capital expenditures, including infrastructure, amount to approximately $5 billion, and we expect our capital expenditures for 2025 to remain flat year-over-year. In summary, as noted, 2025 is set to be a critical year for Tesla. We have made and will continue to make substantial investments this year, paving the way for the next phase of growth. I believe the foundation we are laying now will lead to extraordinary advancements. That concludes my remarks.
Operator, Operator
Great. Thank you very much, Vaibhav. Now, we will move over to investor questions and we'll start with say.com. The first question is, is unsupervised FSD still planned to be released in Texas and California this year? What hurdles still exist to make that happen? You addressed the Texas piece, I think, already, so...
Elon Musk, CEO
Yeah, I'm confident that we'll release unsupervised FSD in California this year as well. Yeah, in fact, I think we will most likely release unsupervised FSD in many regions of the country of the US by the end of this year. Like I said, we're just putting our toe in the water, then a few toes, then a foot, then leg, then make sure everything is cool. And we're looking for a safety level that is significantly above the average human driver. So, it's not anywhere like much safer, not like a little bit safer than human, way safer than human. So the standard has to be very high because the moment there's any kind of accident with an autonomous car, this immediately gets worldwide headlines, even though about 40,000 people die every year in car accidents in the US, and most of them don't even get a mention anywhere. But if somebody scrapes a shin with an autonomous car, it's headline news.
Vaibhav Taneja, CFO
We want to avoid that.
Elon Musk, CEO
The only thing holding us back is an excess of caution. However, people can get a sense of how well the car performs with unsupervised full self-driving by simply driving around their city and noting how often they need to intervene. Not in situations where they felt concerned, but for definitive safety reasons. You'll find that this need to intervene is currently very rare, and over time, almost non-existent.
Operator, Operator
Great. Thank you very much. The next question is, are there any discussions with other auto companies about licensing FSD?
Elon Musk, CEO
Yes. What we're seeing is, at this point, significant interest from a number of major car companies about licensing for Tesla Full Self Driving technology. What we've generally said is the best way to know what to do is take one of our cars apart, and then you can see where the placement of the cameras are, what the thermal needs are of the Tesla AI inference computer. That's better than us sending some CAD drawings. And then we're only going to entertain situations where the volume would be very high, otherwise it's not worth the complexity. And we will not burden our engineering team with laborious discussions with other engineering teams until we obviously have unsupervised Full Self Driving working throughout the United States. I think the interest level from other manufacturers to license an FSD will be extremely high once it is obvious that unless you have FSD, you're dead.
Operator, Operator
Great. Thank you very much. The next question is, is Optimus now mostly design locked for 2025 production?
Elon Musk, CEO
Optimus is not locked in design. When I say we are designing the train, I mean we are continually redesigning the train while also making changes to the tracks and the train stations.
Vaibhav Taneja, CFO
Every discussion.
Elon Musk, CEO
Yeah, it's rapidly evolving. It's rapidly evolving in a good direction. It's pretty amazing actually. The team’s doing a fantastic job. We really have, by far, I think by far the best team of humanoid robotics engineers in the world. And we also have all the other ingredients necessary, because you need a great battery pack, you need great power electronics, you need great charging capability, you need great communications, great Wi-Fi and cellular connectivity. And of course, you need real-world AI. And then the ability to scale that production to huge levels. So you have to design for manufacturing. The things that, really what other companies are missing is they're missing the real-world AI and they're missing the ability to scale manufacturing to millions of units a year.
Vaibhav Taneja, CFO
I think that is an underappreciated thing that industrialization of design is a whole different thing than making a design.
Elon Musk, CEO
Prototypes are quite straightforward to create, but transitioning to production is the challenging part. I've emphasized this for many years. The issue is that people who have not experienced production or manufacturing often believe that once a brilliant design is conceived, it can be effortlessly mass-produced. This misconception is entirely untrue. There should be a compelling story illustrating that manufacturing is the real obstacle, but I have yet to see one. The typical narrative portrays a solitary inventor in a garage who has a moment of inspiration, files a patent, and then sees millions of units produced. However, this perspective overlooks the majority of the process. There's an old saying that highlights how a product is 1% inspiration and 99% perspiration. The popular stories showcase the 1% inspiration while neglecting the essential 99% perspiration, which involves figuring out how to make that initial prototype suitable for manufacturing and then producing it at scale, ensuring reliability, affordability, and consistency. This entire process is at least a hundred times more difficult than just creating the prototype.
Vaibhav Taneja, CFO
Then you have to get it there, deliver it, I think, yeah.
Elon Musk, CEO
Yeah, you have to meet all these regulations, and there's a million regulators around the world, it's pretty difficult.
Operator, Operator
Great, thank you. The next question is also Optimus related. When will Tesla start selling Optimus, and what will the price be?
Elon Musk, CEO
We expect to implement Optimus for internal use at Tesla this year. We can utilize several thousand humanoid robots for the most mundane and repetitive tasks in the factory—those jobs that people typically find tedious and unappealing. The robots are well-suited for these tasks, as they can handle the boring, dangerous, and repetitive work that humans often avoid. For example, Optimus can assist with loading the hopper or moving pieces of sheet metal to the welding line for the vehicle body, tasks that involve repetitively transferring items from one fixture to another. These are precisely the kinds of jobs Optimus is designed to take on.
Vaibhav Taneja, CFO
The guy who runs around all the wall studs and the pins.
Elon Musk, CEO
There are many tedious and slightly dangerous jobs that are ideal for Optimus. We plan to implement Optimus in these roles at our factories, which will help us improve this year. We anticipate launching the production Version 2 sometime next year, possibly in the middle of the year. We are designing a production line that can handle around 10,000 units per month, as opposed to the current 1,000 units per month. It often takes time to reach the expected production output. The current setup targets approximately 1,000 units per month, while the next version will aim for 10,000 units, and eventually, we plan for 100,000 units per month. With Version 2, it’s difficult to predict exactly when we might start delivering Optimus robots to companies outside of Tesla, but a rough estimate would be in the second half of next year. However, this ramp-up is quite exponential, transitioning from no one receiving humanoid robots to them being produced at a rapid pace.
Vaibhav Taneja, CFO
We can't build enough.
Elon Musk, CEO
We will always find ourselves in a situation where we can't meet demand. Demand will remain strong even at high prices. Once we reach a stable production level of over 1 million units a year, I am confident that the production cost of Optimus will be under $20,000. When you compare the complexity of Optimus to that of a car, Optimus is significantly less complex and less massive. Therefore, at production volumes similar to the Model Y, which exceeds 1 million units annually, I would expect Optimus to cost around half as much. However, the final price of Optimus will ultimately be determined by market demand.
Operator, Operator
Great. Thank you very much. The next question is, what is the status on mass production of the Tesla Semi? And how will it impact revenue and scale?
Lars Moravy, Executive
I can take that one. So, we just closed out the Semi factory roof of walls last week in Reno, a schedule, which is great with the weather. In Reno, you never know what's going to happen. But we're prepping for mechanical installation of all the equipment in the coming months. The first builds of the high volume Semi design come late this year in 2025 and begin ramping early in 2026. But as we've said before, the Semi is a TCO, no-brainer. I think it's really similar to Optimus, set by how much people pay and it has the total cost of ownership, it's much, much cheaper than any other transportation you can have. So at that point, when we're at scale, it will meaningfully contribute to Tesla's revenue. I think it’s difficult to say how much. Anything you want to add Elon?
Elon Musk, CEO
I believe that the Tesla Semi, particularly with its autonomous features, will be extremely valuable. There's currently a shortage of truck drivers in America, which is a significant constraint on transportation. Truck driving is a demanding job, and understandably, not many people want to pursue it. In fact, there are actually fewer individuals entering the profession than those who are leaving it.
Vaibhav Taneja, CFO
Yes.
Elon Musk, CEO
When you think about it, there are more people leaving the truck driving profession than entering it, which will lead to a significant logistics problem over time. Therefore, autonomy will be crucial to address this issue. There's a potential opportunity here worth several billion dollars a year, and while that may seem debatable, I believe it is significant. It could be around $10 billion a year, translating to about $1 billion a month at some point. However, all of this will seem minor compared to Optimus. While $1 billion a month is substantial, it will only represent a small fraction of what Optimus could achieve.
Operator, Operator
Great. Thank you very much. We already covered the next question in opening remarks, so moving on. Is it expected that Tesla will need to upgrade Hardware 3 vehicles? And if so, what is the timeline and expected impact to Tesla's CapEx?
Elon Musk, CEO
They're really asking the tough questions, aren't they?
Vaibhav Taneja, CFO
I guess we haven't started working on Hardware 3 yet. We are still making software releases. We recently released version 12.6, which is a significant improvement compared to what we had before, almost like a baby version of V13. People are still finding ways to use larger motors in the smaller models. We haven't given up on Hardware 3; we are still working on it. However, the releases for Hardware 3 will come after those for Hardware 4.
Operator, Operator
Great. Thanks.
Elon Musk, CEO
Yeah. I mean, I think the honest answer is that we're going to have to upgrade people's Hardware 3 computer for those that have bought Full Self Driving, and that is the honest answer and that's going to be painful and difficult but we'll get it done. Now, I'm kind of glad that not that many people bought the FSD package.
Operator, Operator
Thanks, Elon. The next question. Has Tesla given up on ramping their solar roof product?
Elon Musk, CEO
No, we are sorry, Mike, go ahead, yeah.
Unidentified Company Representative, Representative
Yes, I can take it. Yeah, solar roof is a core part of the residential product portfolio and it still remains. It draws a lot of customer interest despite it being premium products. We've worked on multiple iterations of engineering to make the product easier to install and distribute by reducing SKU count. And more recently, rather than direct installation, we are focused on growth through our nationwide network of certified installers. And many of those, they've been installing solar roof for many years.
Elon Musk, CEO
That's actually turned out to be a much better way to supply products to the roofing industry. Especially when someone is getting a new roof or building a house from scratch, this is by far the most efficient time to install a solar roof, rather than putting one on a house with 20 years of roof life left, which doesn’t make economic sense. If it's a new house or the roof needs to be replaced anyway, then a solar roof can be very sensible. It is a premium product, comparable to the Model S or Model X. I believe it looks really cool, and your house generates electricity. When combined with the Tesla Powerwall battery, you achieve self-sufficiency. Even if the grid goes down for several days, your house continues to function, and your roof looks great. I recommend anyone who can afford it to get the Tesla solar roof and the Powerwall. Your family’s well-being might depend on it. For convenience, your kids won’t complain about their computers not working when the power is out and you can’t charge your phone, which actually happens. You can find yourself unable to call anyone because your phone is out of battery.
Operator, Operator
Thank you very much. The next question was covered in opening remarks, so we will skip that. And the last question from say.com. What technical breakthroughs will define V14 of FSD, given that V13 already covered photon to control?
Elon Musk, CEO
We are going to help a lot more than we have in the past with neural networks focused on managing photons to controls. I continue to be impressed by how effective order-aggressive transformers are at addressing a variety of challenges. Ashok, do you have anything to add without revealing any proprietary information?
Ashok Elluswamy, AI Engineer
I mean, except for things we put on X already. Yeah, it's continuing to scale the model size a lot. We scale a bunch in V13, but then there's still room to grow. So we're going to continue to scale the model size. We're going to increase the context length even more. The memory is sort of limited right now. We want to increase the amount of memory, also give to even minutes of context for driving. We're going to add audio and emergency vehicles better, add data of the tricky common cases that we get from the entire fleet, any interventions or any kind of user intervention. We just add that to the data, the dataset. So the scaling in basically every axis, training compute, data set size, model size, model context, and also all the reinforcement learning objectives.
Operator, Operator
Great. Alrighty. With that, we will move over to analyst questions. So just as a reminder, you will need to unmute yourself to ask your question and the first question will be coming from Daniel Roeska from Bernstein. Daniel, please go ahead and unmute yourself.
Daniel Roeska, Analyst
Hey, good evening, everybody. It's Daniel from Bernstein. Elon, Tesla's share price clearly already includes quite few of the anticipated benefits you talked about today, yet realizing what you call kind of difficult but achievable will take some time. What are you pushing the Tesla executive team to do differently now to accelerate the innovation in order to realize the value you described for the company.
Elon Musk, CEO
We are making significant strides in perfecting real-world AI, with continuous progress week by week, or at the very least, month by month. I've been spending considerable time with the Tesla AI and Optimus teams because I focus on addressing the key issues. Sometimes, this means I don’t interact with Tesla executives as frequently because we are seeing great results; I prioritize areas that need attention. That said, we face substantial challenges ahead, particularly with Optimus and vehicle autonomy, but we are advancing quickly in both areas.
Daniel Roeska, Analyst
Okay. I mean, it sounds like you've got a conviction that the pieces you need, right, are in place. If we kind of go 12 months down the line and we look back, and you had some of those, but maybe what are the kind of two or three KPIs that would tell you that you're on track and it's going the right way and the pieces you've put in place are the right pieces, right? That's kind of what I'm looking for or other way around, where would it be off most likely in your mind that you say, hey, I need to go back there and I need to change something to enable the team better?
Elon Musk, CEO
I believe my predictions here will be quite accurate. People often say I'm late, but they only report on my delays, not when I deliver early. While I'm optimistic, I don’t consider myself overly so. In the past, we've finished projects like the Shanghai factory ahead of schedule. I'm confident that by the end of this year, we will have unsupervised Full Self-Driving fully autonomous Teslas in Austin and several other cities across America, with a broader rollout in the U.S. next year, and potentially throughout North America. For next year, I think the main constraints will be regulatory. In Europe, for instance, there's a complex mix of regulations and bureaucracy that needs addressing. There's a saying that America innovates while Europe regulates, and it's true that there are too many hurdles. For us to launch supervised Full Self-Driving in Europe, despite its effectiveness, we have to navigate extensive paperwork with the Netherlands, which then presents it to the EU around May. We expect approval at that time, but we can't expedite this process. If other countries wish for a quicker timeline, they would need to act collectively to make that happen. As for when unsupervised Full Self-Driving might be permitted in Europe, it could be around May next year, but that depends on the EU's meeting schedule. In China, we face significant challenges because the regulations prevent us from transferring training videos outside the country, while U.S. government restrictions limit our ability to train there. We're addressing this by analyzing publicly available videos of streets in China to enhance our training. Bus lanes in China, in particular, are quite complex with specific times of use, and entering them at the wrong time results in instant fines. We’re incorporating this into our simulator, ensuring our cars can navigate these challenges accurately. I believe we'll have unsupervised Full Self-Driving capabilities in most markets this year, primarily hindered by regulatory constraints rather than technical barriers. By this year, we should have it in many U.S. cities, expanding nationwide next year, and with hopes of widespread adoption in most countries by the end of next year. That's my current prediction based on the best available data.
Operator, Operator
Great. Thank you very much. The next question will come from Adam Jonas at Morgan Stanley. Adam, please feel free to unmute yourself.
Adam Jonas, Analyst
Thanks everybody. So, Elon, you've said in the past about LiDAR, for AVs at least, that LiDAR is a crutch, a fool's errand. I think you even told me once, even if it was free, you'd say you wouldn't use it. Do you still feel that way?
Elon Musk, CEO
Yes.
Adam Jonas, Analyst
Care to elaborate or just, I have another question.
Elon Musk, CEO
Look, we even have a radar in the car and we turned it off.
Adam Jonas, Analyst
I understand. People still think you're crazy for not considering LiDAR.
Elon Musk, CEO
Obviously humans drive without shooting lasers out of their eyes. Unless you're Superman. But like humans drive just with passive visual, humans drive with eyes and a neural net and a brain neural net. So the digital equivalent of eyes and a brain are cameras and digital neural nets or AI. So that's the entire road system was designed for passive optical neural nets. That's how the whole road system was not designed and what everyone's expecting, that's how we expect other cars to behave. So therefore that is very obviously the solution for Full Self Driving in it as a generalized, but the generalized solution for Full Self Driving as opposed to the very specific, neighborhood by neighborhood solution, which is very difficult to maintain, which is what our competitors are doing.
Adam Jonas, Analyst
I got it.
Elon Musk, CEO
Yeah. I mean, LiDAR doesn't work in the fall, guys. LiDAR has a lot of issues. I don't have to like, the SpaceX Dragon docks with the space station using LiDAR that a program that I've personally spearheaded. I don't have some fundamental bizarre dislike of LiDAR. It's simply the wrong solution for driving cars on roads.
Adam Jonas, Analyst
Right. You understand how light are works. I get it.
Elon Musk, CEO
Literally designed and built our own red LiDAR. I oversaw the project, the engineering thing. It was my decision to use LiDAR on Dragon and I oversaw the engineering project directly. So I'm like we literally designed and made a radar, a LiDAR to dock with the space station. But if I thought it was the right solution for cars, I would do that, but it isn't.
Adam Jonas, Analyst
At CES, you mentioned that any AI will be capable of performing all cognitive tasks that do not involve physical matter within the next three to four years. This suggests, Elon, that by the end of President Trump's term, AI would be advancing rapidly into the physical realm. Considering your collaboration with the administration, how confident are you that the US will have the necessary manufacturing and supply capabilities to fulfill your optimism about physical AI by the end of this decade? We seem quite vulnerable at the moment. I’ve noticed your recent comments about China producing more drones in a single day than the US does in a year and the complexities surrounding the supply chain. What steps need to be taken in the US to make this a reality? What message do you have, what actions can you take, and what is important for Tesla shareholders? Thank you, Elon.
Elon Musk, CEO
Well, at Tesla, obviously, we think manufacturing is cool. SpaceX, we think manufacturing is cool. But in general, for talented Americans, they need to be beyond, beyond my companies, beyond me and my teams here, in general, we need to make manufacturing cool again in America. And, like, I honestly think people should move from like law and finance into manufacturing. That's my honest opinion. We have too much, this is both a compliment and a criticism. We have too much talent in law and finance in America. And there should be more of that talent in manufacturing. So, yeah. The potential for the future. I mean, it tells that we're making sure that we can continue to manufacture our stuff. Even in the event of geopolitical tensions rising to very high levels.
Operator, Operator
Great. Thank you very much. The next question will come from Pierre Ferragu at New Street. Pierre, please feel free to unmute yourself.
Pierre Ferragu, Analyst
Hey, thanks guys for taking the question. So, I have a question on deploying like robotaxis in June in Austin. So that's great news. And I was wondering if it means I can drive down to Austin in June and try unsupervised by myself with my car, or it's going to be more like your fleet testing it?
Elon Musk, CEO
It'll be our fleet testing it. That's our sort of toe in the water. We'll be scrutinizing it very carefully, make sure it's not something we missed. But it will be, autonomous ride-hailing for money in Austin in June. And then as shortly as possible other cities in America. And I expect us to be operating, doing unsupervised activity with our internal fleet in several cities by the end of the year. Then it's probably next year when people are able to add or subtract their car from the fleet. So, kind of like Airbnb where you can sort of add or subtract your house or your guest room, you can say like add it to the Airbnb inventory or don't add it to the Airbnb inventory. If you're traveling for a month, or whatever, in case maybe you can, that other people use your house. Anyway, that's probably next year because we want to just make sure we've ironed out any kinks. And a lot of it is, it's not like we're not splitting the atom here. It's just a bunch of work that needs to be done to make sure the whole thing works efficiently, that people can order the car. It comes, it's the right spot, does exactly the right thing. All the payment systems work. The billing works.
Pierre Ferragu, Analyst
Yeah. Okay. But then, like, so my follow-up question would be, I have a Tesla, I have a FSD, and I have to keep my eyes on the road all the time. It's super boring because I don't really need to intervene anymore. And the really annoying thing is that I can't just check my emails. And so are you working also on introducing, like a kind of like free and supervised where I could be eyes off and I would be able to check my email and we just need to, with a five second notice, have to go back and keep an eye on what's happening or is that something you're working on as well? Because it feels so close with this certain that I wonder if it's something you'd expect for this year. It's a very sensitive question. I asked for myself to be honest.
Elon Musk, CEO
Yes, we need to be very confident that the risk of injury is minimal before allowing people to check their emails and text messages. Currently, we are in a troubling situation where individuals switch to manual driving to check their messages without the computer alerting them, and then revert to autonomous mode afterward. This is clearly much less safe than allowing them to check their messages occasionally without the computer causing a distraction. We want to be cautious during this transitional phase, but I don’t expect it to last much longer. Nevertheless, we are indeed facing a situation where people disable autopilot to avoid alerts from the computer and check their texts while steering with their knee and not paying attention to the road.
Ashok Elluswamy, AI Engineer
And like Elon said, if you have any problems with the system and when people are not looking, that is a dangerous thing. And that's what we're trying to avoid. The capability is getting there, but it's not fully there. That's why he was using the term of tipping a toe in the water, then getting comfortable, then keeping going.
Elon Musk, CEO
Yeah. Anyway, it's not far off. But we would not want to prove to ourselves and also prove to regulators that the car is unequivocally safer in autonomous mode than not. And that's, we're not far off. So, this is like low single-digit months.
Ashok Elluswamy, AI Engineer
To the safety aspect, we did publish our Vehicle Safety Report today. And then Q4 is one crash for every 5.9 million miles driven compared to a crash every 700,000 miles without...
Elon Musk, CEO
We're getting to the point where it's an order of magnitude.
Operator, Operator
Great. Alrighty. And our last question will be coming from Dan Levy at Barclays. Dan, feel free to unmute yourself.
Dan Levy, Analyst
Great. Good evening. Thank you for taking other questions. Elon, you've talked about the need for proliferation of sustainable transport in the past as part of sort of broader push to sustainable energy. Look, I know we've heard a lot about President Trump's plans to reverse the EV Mandate and I think there's a view that given regulation is a driver of EV uptake, this could slow EV uptake in the US. So, what would be your view on the right policy in the US, given your comments in the past of the need to push for sustainable transport?
Elon Musk, CEO
At this point, I think that sustainable transport is inevitable. I'm highly confident that all transport will be autonomous electric, including aircraft, and that it simply, it can't be stopped any more than one could have stopped the advent of the external combustion engine, steam engine, or one could have stopped the advent of the internal combustion engine. Like, even if you've been the biggest advocate on earth, like courses of the way, not these newfangled car automobiles, you can't stop the advent of automobile. It's going to happen. And you can't stop the advent of electric cars. It's going to happen. The only thing holding back electric cars was range, and that is the sole problem.
Dan Levy, Analyst
Great. And then as a follow up, in the past, Elon, you had made a comment that, you'd be willing to sell cars at effectively no margin to get the cars out there. And there's a comment in the release today of the rate of acceleration of autonomy efforts does impact volume growth. So perhaps you could just talk about, with your efforts on FSD, how we should think about your desire to put more vehicles out in the market to take advantage of your tech advances.
Elon Musk, CEO
So, I'm not sure I understand the question. We have a lot of cars. I mean, we've got millions of cars out there.
Vaibhav Taneja, CFO
So, is your question, Dan, that how do we marry our future growth aspects with FSD?
Operator, Operator
Go ahead and unmute yourself, Dan.
Dan Levy, Analyst
Yeah. More so just how much more aggressively you would be willing to sell your cars versus in light of your improvements on FSD.
Elon Musk, CEO
Right now, the main issue we're addressing is battery production rather than demand. In Q1, we have a significant factory retooling for the new Model Y, which will have a temporary effect on output. The executive team and I discussed earlier that we need to find ways to increase the total gigawatt hours of battery production this year, as that is the limitation on our output.
Operator, Operator
Great. Alrighty. And with that, I think we are all done for today. So, thanks, everyone, so much for all your questions. We look forward to talking to you next quarter. Thank you very much, and goodbye.