Tesla Q3 2025 Financial Results and Q&A Webcast

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Good afternoon everyone and welcome to

Tesla's third quarter 2025 Q&A webcast.

My name is Travis Axelrod, head of

investor relations, and I'm joined today

by Elon Musk, Vebov Teneza, 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 uncert

uncertainties, including those mentioned

in our most recent filings with the SEC.

We urge shareholders to read our

definitive proxy statement, which

contains important information about the

matters to be voted on at the 2025

annual meeting.

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. We're

we're at a critical inflection point for

Tesla and our strategy going forward as

we bring AI into the real world. Um, I

think it's important to emphasize that

Tesla really is the leader in real world

AI. Uh, no one can do what we can do

with real world AI. Um, I have pretty

good insight into AI in general. I think

that Tesla has the highest intelligence

density of any AI out there in the car.

Um, and that is only going to get

better.

Um, and we're really just at the

beginning of scaling at a at a quite

massively full self-driving and robo

taxi and fundamentally changing the

nature of transport. I think people just

don't don't quite appreciate the degree

to which this will uh take off. um

where that it's honestly it's going to

be like a shock wave. Um so

it's it's a

you cuz the cars are all out there.

there. You know, there are millions of

cars out there that with a software

update become

um full self-driving cars and um and you

know, we're making

a couple million a year um and and in

fact with the advent of w with with what

we see now as as a clarity on

achieving full self-driving,

unsupervised full self-driving I should

say, um I feel confident Ident in

expanding Tesla's production. Um, so

that is that is our intent to expand as

quickly as we can our future production.

Um, so I was I was reticent to do that

until we had clarity on on

achieving uh unsupervised full

self-driving. But at this point I I feel

like we've got clarity and it it makes

sense to

um expand production as as fast as we

reasonably can.

uh we're also making huge uh um

making huge impact on the energy sector

with uh with battery storage. So with

both the power wall um and especially

with the mega pack uh we are

dramatically improving the ability to um

generate more energy from the grid. Let

me sort of talk a little bit about that

which is if if you look at total US

energy um capability for example there's

roughly a terowatt of of continuous

power available in the US but the

average usage over a 24-hour cycle is

only half a terowatt because of the big

difference between day and night usage.

Um, if you buffer the buffer the energy

with batteries, you can effectively

double the energy output in the United

States just with batteries building no

incremental power plants. Um, and it's

very difficult to build power plants.

So, uh, they take a long time. There's a

lot of permitting and it's not an

industry that's used to moving fast. So

we see the potential there for Tesla

battery packs uh to greatly improve the

um the energy output per year for any

given grid US or otherwise.

Um, we're also on the cusp of of

something really tremendous with

Optimus, um, which I think

uh, is likely to be or has potential to

be the biggest product of all time. Um,

and uh

it's it's a a difficult project. Um, and

it's worth noting that it's not like

it's just automatic. Um I'm unaware of

any robot program by uh Ford or GM or

you know by US sort of car companies.

People like I think maybe think of Tesla

as as a car company. We mostly make cars

um and battery packs. Uh but uh

so it's not like it's not just like an

obvious wall of a log thing to make

Optimus but but we do have the

ingredients um with of real world AI

um and exceptional electrical mechanical

engineering capabilities

um and the ability to scale production

which I don't think anyone else has all

of those ingredients.

Um

so

uh yeah with

with with version 14 of the uh of

self-driving which people you can see

the reactions of of people online um

they're quite amazed. Um actually anyone

in the US can get uh version 14 if they

just uh go and select uh I want the

advanced software in their car. So, if

if you're listening right now and you'd

like to try it out, just uh go in um in

settings and say I want the advanced

software and you will get version 14. Um

and uh yeah, so

uh on the Mega front, we we we unveiled

Mega Blok, Mega Pac 3. Um we also have

exciting plans for Mega Pac 4. uh Mega

Pac 4 will incorporate uh a lot of the

um

uh a lot of what is normally in a

substation uh and be able to output uh

at uh

probably 35 kilovolts uh directly. So

this this greatly improves our ability

to deploy Megapac because it's not

dependent on building uh a substation up

through 35 KB for mega pack 4. So that

that'll be

that that's the that's the engineering

priority for um MegaPAC. Um

and uh we look forward to unveiling

Optimus V3

um you know probably in Q1. I think

it'll be ready for

uh to show off and uh that that I think

is going to be quite remarkable. um

if you it won't even seem like a robot.

It'll seem like a person in a robot

suit, which is kind of how we started

off with Optimus.

Um but it it'll seem so real that you'll

need to like poke it, I think, to

believe that it's actually a robot.

Um

and and obviously like the the real

world intelligence we're devel we've

developed for the car. Um most of that

transfers to Optimus. So it's a it's a

very good starting point.

Um in conclusion uh we're excited about

the you know updated mission of Tesla

which is sustainable abundance. Um so

going beyond sustainable energy to say

sustainable abundance is the mission

where uh we we believe with

uh with Optimus and self-driving

um

that uh you can actually create a world

where there is no poverty uh where

everyone has access to the finest

medical care. Um

like Optimus will be an incredible

surgeon for example. Um and imagine if

everyone had access to an incredible

surgeon.

Um

so so I I think there's

you know of course we need make sure

Optimus is safe and everything but but I

I do think we're headed for a world of

sustainable abundance and that I'm

excited to work with the Tesla team to

make that happen.

Great. Thank you very much, Elon. Uh,

Vebup also has some opening remarks.

>> Thanks, Travis. Q3 was a special quarter

at multiple levels. We set new records

not just for deliveries and deployments,

but also around a range of financial

metrics from total revenues, energy

gross profit, energy margins to fresh

free cash flow.

This was the result of continued

confidence of our customers in our

products and the relentless efforts by

the Tesla team. The strength and

deliveries was attributed to strong

performance across all regions. Greater

China and APAC were up sequentially 33

and 29% respectively. North America was

up 28% while AMIA was up 25%. The pace

in deliveries was the function of

continued excitement around the new

Model Y. We had previously talked about

2025 being the year of the Y and have

since delivered on that promise with the

new Model Y released in Q1 followed by

Model Y long wheelbase and performance

and more recently Standard Y in North

America and AMIA.

We're now operating a robot taxi in two

markets, Austin and most Bay Area

cities. We've already expanded our

coverage area in Austin three times

since the initial launch and are on pace

to continue expanding further. Unlike

our competitors, our robotaxi fleet

blends in the markets we operate in

since they don't have extra sensor sets

or peripherals which make them stick

out. This is an underappreciated aspect

of our current vehicle offerings which

are all designed for autonomous driving.

We feel that as experience uh as people

experience the supervised FSD at scale,

the demand for our vehicles like Elon

said would increase significantly.

On the FSD adaption front, we we've

continued to see decent progress.

However, note that total paid FSD

customer base is still small, around 12%

of our current fleet. We're moving we're

working with regulators in places like

China and AMIA to obtain approvals. so

that we can get FSD in those regions as

well. Now covering a little bit on the

financial side, automotive revenues

increased 29% sequentially in line with

the growth in deliveries. While

regulatory credits declined

sequentially, we entered into new

contracts and continued delivery on

previously entered contracts.

Our automotive margins excluding credits

increased marginally from 15% to 15.4.

before which was attributed to

improvements in material cost and better

fixed cost absorption due to higher

volumes.

The energy storage business continued to

deliver with record deployments, gross

profit and margins. As discussed before,

this business has a bigger impact from

tariffs as measured by percentage of

COGS since currently all sales procured

are from China while we're still working

on other alternatives.

However, as uh the ramp of mega factory

Shanghai is happening, this is helping

us avoid tariffs because we are using

this factory to supply the non US

demand.

Like Elon said, you know, grids scale

storage. The only way we can get to

electricity fastest is by using storage.

The other thing to keep in mind is we

are seeing headwinds in this business

given the increase in competition and

tariffs. The total tariff impacts for Q3

for both businesses was in excess of 400

million generally split evenly between

them.

Services and other demonstrated a marked

improvement sequentially. This was a

function of improvements primarily in

our insurance and service center

businesses. Note that while small, our

robo taxi costs are included within

services and other along with our other

businesses like paid supercharging, used

car, parts and merchandise sales, etc.

Our operating expenses increase

sequentially.

The largest increase included in

restructuring and other related to

certain actions undertaken to reduce

cost and improve efficiency through

convergence of our AR AI chip design

efforts. Additionally, we incurred legal

expenses related to proceedings in

certain legal cases as well as

incremental cost incurred in preparation

for a shareholder meeting. Such costs

are recorded within SGNA.

Further, our employee related spend is

increasing especially in R&D as we have

recently granted various

performance-based equity awards to

employees working on AI initiatives and

therefore such spend will continue to

increase going forward.

on other income. Uh our other income

decreased sequentially primarily from

locktomarket adjustments on BTC holdings

which was much smaller gain of 80

million in Q3 versus 284 million in Q2

with the rest of the movement

attributable to FX movements in the

quarter.

Our free cash flow for the quarter was

approximately 4 billion which was yet

another record. Our total cash and

investments at the end of the quarter

were over 41 billion.

On the capex front, while we are

expecting to be around 9 billion for the

current year, we're projecting the

numbers to increase substantially in

2026 as we prepare the company for the

next phase of growth in terms of not

just our existing businesses, but our

bets around AI initiatives, including

Optimus.

In conclusion, note that bringing AI

into real world is hard, but we have

never shied away from doing what is

hard. We're extremely excited about the

future and are laying down the

foundation, the benefits of which will

be realized over years to come. I would

like to end by thanking the Tesla team,

our customers, our investors and

supporters for the continued belief in

us.

>> Thank you very much, Vebov. Now, let's

go to investor questions from say.com.

The first question is, what are the

latest robo taxi metrics, fleet size,

cumulative miles, rides completed,

intervention rates, and when will safety

drivers be removed? What are the

obstacles still preventing unsupervised

FSD from being deployed to customer

vehicles?

>> I'll I'll start off with that and then

Sh can elaborate. Um but uh we we are

expecting to

have uh no safety drivers in uh at least

um large parts of Austin by the end of

this year. So within a few months uh we

expect to have no safety drivers um at

all um in at least in parts of Austin.

We're obviously being very cautious

about the deployment. So um so our goal

is to be actually be paranoid about

deployment because obviously even one

accident will be front page headline

news worldwide. So um you know it's

better for us to take a cautious

approach here. Um but we do expect to

have no no safety drivers in the car um

in Austin uh in within a few months. I

think that's perhaps the most important

uh data point. And then we we do expect

to be uh operating robo taxi in

uh I think about uh 8 to 10 metro areas

by the end of the year. Um you know it

depends on various regulatory approvals.

Um and um but you you can actually I

think most of our regulatory

applications are online. You can kind of

see them uh because they're they're

public information. Um but we expect to

be oper operating in Nevada and Florida

and Arizona um by the end of the year.

Um sure.

>> Yeah, we we continue to operate our um

fleet in Austin without anyone in the

driver's seat and we have covered more

than a quarter million miles um with

that. And then in the Bay Area where we

still have a person in the driver's seat

because of the regulations we cross more

than a million miles. Um so and we

continue to see that the fleet um robot

XCI fleet works really well. Customers

are really happy um and there's no

notable issues on the customer uh side.

We have customers have used FS

supervised for a total of 6 billion

miles um as of yesterday. Um so that's

like a big milestone. Uh and overall the

safety continues to be very good and as

Elon mentioned we are on um on track to

remove the person from inside the car

altogether. Uh starting with Austin.

>> Great. Uh the next question is what is

the demand uh and backlog for mega power

wall solar or energy storage systems

with the current AI boom? Is Tesla

planning to supply power to other

hyperscalers?

>> Thanks. Um demand for me and Power Wall

continues to be really strong into next

year. We we received very strong u

positive customer feedback on our Mega

Mega Block product which will begin

shipping next year out of Houston.

And we're seeing remarkable growth in in

the demand for AI and data center

applications as hyperscalers and

utilities have seen the versatility of

the mega product to increase reliability

and receive and relieve grid constraints

as Elen was talking about. We we've also

seen a surge in residential solar demand

in the US due to policy changes which we

expect to continue into the first half

of 2026 as we introduced a new solar

lease product. And we also began

production of our Tesla residential

solar panel in our Buffalo factory and

we will be shipping that to customers

starting Q1. The panel has

industry-leading aesthetics and shade

performance and demonstrates our

continued commitment to US

manufacturing.

Great. Uh thank you Mike. Um

unfortunately the next question is

related to future products. Uh this is

not the appropriate venue to cover that

so we're going to have to skip it. Um

the question after that is what are the

present challenges in bringing optimist

to market? Considering app control

software, engineering hardware, training

general mobility models, training task

specific models, training voice models,

implementing manufacturing and

establishing supply chains.

>> Yeah, I mean bringing office optimist to

market is is an incredibly difficult

task to be clear. It's it's not like

some walk in the park. um at at some

point. I mean at this actually

technically Optimus can walk in the park

right now. Um we and we do have Optimus

robots that walk around our offices uh

at our engineering headquarters in

PaloAlto, California uh basically 24

hours a day, 7 days a week. Um, so any

visitors that come by, you actually um

you can you can stop to stop one of the

Optimus robots and uh ask it to take you

somewhere and it'll literally take you

to that meeting room or that location in

the building. Um so um I don't want to

downplay the difficulty of this. It's a

it's an incredibly difficult thing,

especially it's difficult to create a um

a hand that is as dextrous and capable

as the human hand, which is an

incredible the human hand is an

incredible thing. Um that the more you

study the human hand, the more

incredible you realize the human hand

is. And and why you need five, you know,

four fingers and a thumb, why the why

the fingers have certain degrees of move

of freedom. um you know why why the the

various muscles are of different

strengths um the fingers are of

different lengths um and uh it turns out

actually that that all that those are

all there for a reason um and uh so

making making it that the hand and and

forearm because most the most of the

actuator just like the human hand the

the muscles of that control your hand

are actually primarily in your forearm.

Um, the Optimus hand and forearm is an

incredibly difficult engineering

challenge. Um, it's I'd say it's a more

difficult than the rest of from an

electro mechanical standpoint, the

forearm and hand are is more difficult

than the entire rest of the robot. Um,

so uh but really in order to have a a a

useful generalized robot, you you do

need this you do need an incredible hand

and uh and you need the real world AI.

Um,

and you need to be able to scale up that

production

um to have it be relevant because it's

not relevant if it's just a few hundred

robots. Um, but so you need to be able

to make uh Optimus robots at volumes

comparable to vehicles um if not

significantly higher. Um

so uh trying to make a million or

something per year trying to make a

million Optimus robots per year that

manufacturing challenge is immense

considering that the supply chain

doesn't exist. So with with cars you've

got an existing supply chain. With

computers you've got an existing supply

chain. With uh with a humanoid robot

there is no supply chain. Um so in order

to to manufacture that Tesla actually

has to be very vertically integrated uh

and manufacture

um

very deep into the supply chain

manufacture the parts internally because

there just is no supply chain. Um,

so, uh, this is this is the kind of

thing where I'm like, if I put myself in

the position of a startup trying to make

an a humanoid robot, I'm like, I don't

know how to do it without, um, an an

immense amount of manufacturing

technology. Um

so that's that's why I think like

Tesla's in some almost a unique I think

I think unique position when you

consider manufacturing technology

scaling um real world AI and the and and

a truly dextrous hand. Uh those are the

generally the things that are missing

when you read about um other robots that

they just don't have those three things.

Um so no I think we can achieve all

those things those those three things

with an immense amount of work. Um

and um and that that is that is the game

plan.

So um

you know, my like like my,

you know, fundamental concern with

regard to

how much voting control I have at Tesla

is if I go ahead and build this enormous

robot army, can I just be ousted at some

point in the future? Um, that's my

biggest concern. if I that's that that

is the the that is really the only thing

I'm trying to address with with this uh

so what's called compensation but it's

not like I'm going to go expend the

money it's just

if we build this robot army um do I have

at least uh a strong influence over that

robot on the not not control but a

strong influence that's that's what it

comes down to in a nutshell um like I

don't feel comfortable building that

robot on me if I don't have at least a

strong influence

Great. Thank you. Uh we've already

covered robo taxi expansion. Um

unfortunately the question after that is

another future product question. So

we're going to have to skip that. Um the

next one though is can you update us on

the $6.5 billion Samsung chip deal in

Taylor? Given the importance of

semiconductors to autonomy in Tesla's

AIdriven future, what gives you

confidence Samsung can fulfill AI6 at

Tesla's timelines and achieve relatively

better yields and cost versus TS TSMC?

>> Okay, so I'm I'm going to give quite a

long answer to this question because

it's because uh I have to unpack this

question and then and then answer the

unpacked version. Um, so, u, first of

all, um, I have nothing but great things

to say about Samsung. They're an amazing

company. Um, and Samsung, it is worth

noting, um, does manufacture, um, our

AI4 computer and does a great job doing

that. Um so

um now w with the the AI5

um and here's I I I need to make a point

of clarification relative to some

comments I've made publicly uh before

which is we're actually going to focus

both TSMC and Samsung initially on AI5.

So, um the the AI5 chip design by Tesla

is I I think it's an amazing design.

Um

I have spent almost every weekend for

last

last few months uh with the chip design

team working on AI5

and

I don't hand out praise easily but I

have to say that I think I think the

Tesla chip team is is really designing

an incredible chip here. This is by some

metrics the AI5 chip will be 40 times

better than the AI4 chip. Not 40% 40

times.

Um because we we have a detailed

understanding of the entire software and

hardware stack. So we're designing the

hardware to uh address all of the pain

points in software. Uh, so I don't think

there there really isn't anyone that's

doing this the the entire stack um all

the way through real world uh you know

calibrating against the real world where

you've got cars and robots in real world

that like we we know what the chip needs

to do and we know what just as

importantly we know what the chip does

doesn't need to do.

um you know to sort of give you some

examples here um with the AI5 we we

deleted the um the legacy GPU or the the

traditional GPU which is it it's in AI4

um but AI5 does not have um

we just just deleted the the legacy GPU

because it basically is a GPU um so uh

we also deleted the image signal

processor. Um and

uh there's like a long list of actually

of deletions that are very important. Um

as a result of these deletions, we can

actually fit AI5

uh in a half reticle. Um, and w with

with with good margin for the traces

from the memory to the the the trip the

Tesla trip accelerators

um the ARM the ARM CPU cores um and um

and the PCI X sort of uh

the PCI blocks. So uh

this this is a beautiful chip. Um

I've poured so much life energy into

this show personally. Um and I'm I'm

confident this will be this is going to

be a winner next level. Um so it makes

sense to have uh both Samsung and TSMC

focus on AI5. Um

and so even like the technically the

Samsung FAP has slightly more advanced

equipment than the TSMC FAB. These will

both be made in um in the US that in one

TSMC in Arizona, Samsung in Texas. Um

and uh but but it's uh it we're going to

make starting off just to be confident

of having our our goal explicit goal is

to have an over supply of AI5 chips. Um

because if if we if we have too many AI5

chips for the cars and and and robots,

we we can always put them in the data

center.

So we already use AI4

uh for for training in in our data

center. So we use a combination of AI

full and uh NVIDIA hardware. Um

so um

we're not about to replace NVIDIA to be

clear, but but but we do use both in

combination. um AI4 and Nvidia hardware

and the AI5 excess production we can

always put in in our data centers. Um

you know Nvidia keeps it keeps improving

um that the challenge that they have is

that they've got to satisfy a large

range a lot of requirements from a lot

of customers but Tesla only has to

satisfy requirements from one customer

with Tesla. that that makes the design

job radically easier and means we we can

delete um uh a lot of complexity from

the chip. Like I can't emphasize how

important this is. Um so like when you

look at the various logic blocks in the

chip um as you increase the number of

logic blocks you also increase the uh

interconnections between the logic

blocks. So you can think of it like um

you know just highways like how many

highways do you need to connect the

various parts of the chip? Um, and

especially if you're not sure h how much

data is going to go between uh each uh

you know uh logic block on the chip,

then you you kind of end up having giant

highways going all over the place. Um

it's a very it like it becomes an almost

impossibly difficult uh design problem

and Nvidia's done an amazing job of

dealing with almost an impossibly

difficult set of requirements. Um but in

our case we we we're going for radical

simplicity. Um and the net effect is

that I I I think AI5 will be the best

performance per watt. Um maybe by a

factor of two or three um and the best

performance per dollar for AI maybe by a

factor of 10.

So you know that's

uh you know we we'll have to the proof's

in the pudding. So obviously we need to

actually get this chip made um and made

at scale. Uh but that's what it looks

like.

Great. Thank you, Elon. Uh we've already

covered uh unsupervised FSD. Um so the

next question is instead of trying to

replace hardware 3 with hardware 4, why

not give an equal incentive to trade in

for a new vehicle?

>> Yeah, we've not completely given on upon

hardware 3. However, over the last year,

we've offered the customers the option

to transfer FSD to their new vehicle,

which which at times we've been running

some promotions. If if they got FSD,

they can get better preferential rates.

So, we've been definitely taking care of

this, but we do want to solve autonomy

first and then we'll come back with a

way to take care of these customers.

These customers are very important. They

were the early adapters. For what it's

worth, my daily commuter is a hardware

three car which I use FSD on a daily

basis. So we will definitely take care

of you guys.

>> Great. Thank you.

>> In addition, um once the V14 release

series is fully done, we are planning on

working on a V14 light version for

hardware 3 probably expected in Q2 uh

next year.

Awesome.

Thanks, Ashoke. All righty. Um, our

final question from Se is, uh, how long

until we see self-driving Tesla

semi-truckss? Uh, and could you see this

technology replacing trains?

>> Yeah. So, I guess I'll start with that

in terms of the semi uh, production plan

and schedule. So, the factory is is

going on schedule. We've, you know,

completed the building and are

installing the equipment now. Um, we've

got our fleet of validation trucks uh

driving on the road. We'll have larger

builds towards the end of this year and

then our first online builds in the

first part of next year. Uh, ramping

into, you know, the Q2 timing with real

volume coming the back half of the year.

Um, so that's going quite well and and

that's the first step obviously getting

autonomous uh trucks on the road. Um, in

terms of trains, you know, they're

really great for long pointto-oint

deliveries. are super efficient, but you

know that last mile, the load unload uh

can be better served for shorter

distances with autonomous semis and that

would be great and so we do expect that

to probably shift in as we you know

really as Elon said change the way

transportation is considered um and so

we're looking forward to that timeline

and Ashok I know you uh can can take the

the full self-driving part. Currently

the team is like super focused on uh

solving for passenger vehicle autonomy.

That said the same technology will uh

extend quite easily to the semmit truck

once we have a little bit of data from

the semmit trucks.

>> Great. Uh and now we will move over to

analyst questions. Uh the first question

comes from Emanuel uh at Wolf. Emanuel,

please go ahead and unmute yourself.

>> Great. Uh thanks so much. Uh hi

everybody. Um so Elon, you talked about

um expanding production of vehicles as

fast as possible now that you have

confidence in the unsupervised autonomy.

Um how should we think about that in the

context of your existing capacity of 3

million units? Um is that um where

you're hoping to get volume to? What

sort of timeline are we talking about?

And uh would this require you know some

level of uh boosting or incentivizing

demand? Like would this basically be

prioritizing volume over near-term

profitability given the longerterm

opportunity?

>> Well, uh our capacity isn't quite 3

million. Um but uh it it it will be 3

million at some point. Um, you know,

aspirationally, you know, it could be 3

million within we could probably hit an

annualized rate of 3 million within 24

months, I think. Um, maybe less than 24

months. Um, bearing in mind like there's

there's an entire like supply chain like

a vast supply chain that's got to also

move in tandem with that. Um, so but

we're gonna we're we're going to expand

uh production as fast as as uh as as as

we can. Um as fast as our suppliers can

can um

can sort of keep up with it. Um and then

we got to think about uh where do we

build incremental factories uh beyond

that. Um like the single biggest uh

expansion in production will be the the

Cyber Cap which starts production um in

Q2 next year. Um that's uh that's really

a vehicle that's optimized for full

autonomy. Uh it in fact does not have a

steering wheel or pedals. Um and is

really um an engineering optimization on

minimizing cost per like fully

considered cost per mile of operation.

Um, so that's, you know, we for for the

other for the for our other vehicles,

there's still they still have a little

bit of the horseless carriage thing

going on where, you know, obviously

you've got if you're still if you've got

steering wheels and pedals and um and

and you're designing a car that uh

people might want to go, you know, very

do right fast acceleration and tight

cornering like high performance car, you

know, cars, then you're going to design

a different car than one that is

optimized for a comfortable ride um but

doesn't expect to go, you know, past

sort of 85 or 90 mph. Um, and it's it's

just aiming for a gentle ride the whole

time. That's what cyber cap is. Um,

so um

yeah. So, so it's

do I think we'll sacrifice margins? Uh,

I don't think so. Um, I think the demand

will be pretty nutty. Um, like here's

the here's the killer app. Really, what

it comes down to is can you text? Can

you text while you're in the car? And if

you tell someone, yes, the the car is

now so good, you can you can you can be

on your phone uh and text the entire

time while you're in the car. It's

anyone who can buy the car will buy the

car and and a story.

Um so um that's what everybody wants to

do. In fact, not everyone wants to do

it. They do do that. And that's why in

fact the reason you've seen like that

there's been an uptick in accidents uh

pretty much worldwide is because people

are texting and driving. Um so uh

autopilot actually dramatically improves

the safety here. Um because if

somebody's looking down at their phone,

they're not driving very well. Um so

that's that's really the the game

changer. Um and uh

you know we we do see like at this point

I feel

you know essentially 100% confident I

say not essentially 100% confident that

we can set that we can solve

unsupervised full self-driving at a

safety level um much greater than human.

Um

uh so we've released 14.1. We've got a

technology road map that's I think

pretty amazing. We'll be adding

reasoning to the car. Uh uh our world

simulator for sim for reinforcement

learning is is pretty incredible. like

our like our when you see that the Tesla

reality simulator um it's you can't tell

the difference between the video that's

generated by the Tesla reality simulator

and the the actual video looks exactly

the same. Um so that that that allows us

to um have a very powerful reinforcement

learning loop uh to further improve the

Tesla AI. we're we're going to be in

increasing the parameter count by an

order of magnitude. Um that that's not

in 14.1. Um there are also a number of

other improvements to the AI just um

that that are that are quite radical. Um

so it's uh

this car will feel like it is a living

creature. That's how good the the AI

will get with the AI4 computer. This is

before AI5 and then and then AI5 like I

said is by some metrics 40 40 times

better. Um let's just say safely it's a

10x improvement. Um

so it might almost be too much

intelligence for a car. I do wonder like

how much intelligence should you have in

a car? It might get bored. Um

actually um and then one of the things I

thought like well if we got all these

cars that maybe are bored well why

they're while they're sort of if they

are bored we we could actually have a

giant distributed inference fleet and

say like well if they're not actively

driving let's just have a giant

distributed inference fleet.

um you know at some point if if you've

got like tens of millions of cars in the

fleet or maybe at some point 100 million

cars in the fleet um and um

let's say they had at at that point you

know u

I don't know uh a kilowatt of inference

capability of you know high performance

inference capability that's 100 gawatts

of inference

distributed

with with power and cooling taken with

with with cooling and and power

conversion taken care of.

So

that seems like a pretty significant

asset.

Great. Thanks Elon. Uh the next question

comes from Adam uh from Morgan Stanley.

Adam, please feel free to unmute

yourself.

Uh, Adam, go ahead and ask your

question.

Seems like we might be having some audio

issues with Adam. Uh, so we'll come back

to you. Um, the next question will then

come from Dan uh from Barclays.

>> Hi, good evening. Thank you for uh

taking uh the question. Um Elon, I I

know that uh Tesla's really focused on

with master plan 4 bringing AI into the

physical world and I think we've seen

over the past, you know, this

willingness for Tesla to engage and and

go into new markets, new TAMs. So when

you think about the growth prospects,

how do we define the areas that are

really within Tesla's core competency

versus where do you draw the line for

markets or AI applications that are

outside of Tesla's core competency?

>> Um, actually I'm not sure what you mean

by a AI applications outside of Tesla's

core competency. Um but uh I we we kind

of we didn't have any of these core

competencies when we started you know um

so it's like we had zero core

competencies total competency of zero

actually um so I mean you can think of

Tesla as like I don't know a dozen

startups in one company um

you know and and uh I've initiated every

one of those startups so it's uh you

used to make battery packs say

stationary battery packs but now we do

we make them for the home make them for

you know utility scale with power wall

mega pack uh we created the supercharger

network globally uh no no one else has

created a global supercharge network in

fact North American supercharge network

is so good at that that basically that

every other manufacturer in North

America has converted to our standard um

and uses our the Tesla supercharger

network um but if it was so easy, why

don't they just do it? Um, and uh, the

chip design team um, started that from

scratch. The Tesla AI software team was

soldered from scratch. Um, I literally

just say, "Hey, we're going to start

this thing." I posted on Twitter now X

and then, you know, join us if you'd

like to build it. Um in fact uh Ashok

was I believe the first person I

interviewed for the Tesla autopilot team

which we now call Tesla AI software team

which because it is the AI software team

um

so you know it's core companies

competency is created while you wait um

and um

you know Optimus at scale it is the

infinite money glitch it's like this is

a

It's difficult to express the magnitude

of like if you've got um

something that like that

like if Optimus I think probably achieve

5x the productivity of a person per year

because it can operate 24/7. Um it

doesn't even need to charge. It can

operate it tethered. Uh so it's it's

plugged in the whole time. Um

and um

what so it that's that's why I call it

like if you're true of sustainable

abundance

um where working will be optional. You

know there's there's a limit to how much

how much AI can do in terms of enhancing

the productivity of humans. Um but there

is not really a limit to

uh AI that is embodied.

That's why I called the infinite money

glitch.

I mean one thing which I'll further add

is I mean people forget like our first

iteration of autopilot was 10 years

back. So you know Elon had started this

way back in the day.

>> We got the twist to prove it.

>> Exactly. And then even even on the

optimist side right as much as people

think okay this is a new thing I still

remember was it four plus years back we

were in a finance meeting with Elon and

Elon said hey our car is a robot on

wheels and that's where we we started

developing in fact most of the

engineering team which is working on

Optimus has come from the vehicle side

and that's why you know when we talk

about manufacturing proess

we have the wherewithal because the same

engineers who worked in the back in the

day on drive units are working on

actuators now. So that's where we can do

if there is any company which can do it

at scale that is going to be us.

>> But we we also have actually added a lot

of new engineers as well to the team. So

there's actually uh a lot of the credit

for the Optimus engineering is is

actually also new new engineers many of

them that are just out of college

actually.

>> Yeah. Uh so uh the optimist engineering

uh team is a very talented engineering

team. Um I'd say like wow actually. So

um and uh you know the Optimus reviews

at this point are there's the the

engineering review um and then there's

the manufacturing review being done it's

simult simultaneously

um with an iter iterative loop between

engineering design and and manufacturing

because then we see we we we design

something and we say like oh man that's

really difficult to make we need to

change that design to make it easier to

manu manufacturer. Um, so we've made

radical improvements to the design of

Optimus um, while increasing the

functionality but making it actually

possible to manufacture. Like I'd say

Optimus 2 is almost impossible to

manufacture frankly. Um, but um, to

point we've gone from uh, you know, a

person in a robot outfit to uh, what

what people have seen with Optimus 2.5

where it's doing kung fu. um you know it

was like Optimus was at the uh at the

Tron premiere um doing kung fu you know

just out in the open you know like with

Jared Leto

like there wasn't uh nobody was

controlling it was just doing kung fu

with Jared Leto uh you know at the Tron

premiere um you can see the videos

online um and um actually the funny

thing is like a lot of people walked

past it uh thinking it is uh just a

person even though with Optimus

uh 2.5 you can see that it has you know

a waist that's 3 in wide that was

obviously not a human. Um so

uh but but the movements were so

humanlike that people didn't realize a

lot of people didn't realize they were

looking at a robot. So

um

and what I'm saying is like Optimus 3

will be a giant improvement on that um

animated scale. Um but like said a very

difficult thing. Um you know the the

Optimus uh sort of engineering and man

manufacturing reviews and there's the

Friday night meeting with Optimus which

sometimes goes till midnight. Um and

then my Saturday meeting is is with the

is is the Saturday afternoon is with the

the AI five chip design team. Um

so um those two things are uh crucial to

the future of the company.

>> Dan, did you have a followup? Yeah, just

as a related maybe you could just talk

about to what extent are the AI efforts

at Tesla and XAI complimentary or are

they just different forms of AI? Maybe

you could just help distinguish for the

audience. Thank you.

>> Yeah, there are different forms of AI.

Um so

the

you know the

the XI so Grock is like a a giant model

that that uh you could not you could not

possibly squeeze Grock uh onto a car.

That's for sure. It is a giant beast of

a model. It's with Grock, it's trying to

say solve for artificial general

intelligence with a massive amount of AI

training compute and and inference

compute. Um, so for example, Gro 5 will

actually only run effectively on a

GV300. That's that's how much of a beast

that Gro 5 is. uh um so uh you know

whereas Tesla's uh

you know models are I don't know maybe

about less than 10% the size maybe

closer to 5% the size of of of Grog um

so yeah they're they're they're really

coming at the problem from very

different um angles

um XA and Grock are are you know they're

competing with um

uh you know Google Gemini and Open Chat

GBT and that kind of thing. Um so um and

some of it's complimentary. You for

example for Grock voice uh being able to

interact with Grock in the car is cool.

Um Grock uh for you know Optimus voice

recognition and a voice generation uh is

Grock. So that's that's helpful there.

But they are uh coming at it from kind

of opposite ends of the spectrum.

>> All righty. Um Adam, let's give it

another try. Uh when you're ready,

please unmute yourself for the next

question.

All righty. Unfortunately, uh still

having audio issues. So we're going to

move on to uh Walt from Lightshed.

Walt, please go ahead and unmute

yourself.

>> Can you hear me now?

>> Yes.

>> Perfect. Thank you. Um

um just getting back to Austin, if if

you can remove the safety driver at your

end, um is the limitation the Bay Area

just regulatory or is it kind of the

market bymarket learning process? And I

guess similarly in the 8 to 10 markets

that you mentioned to get added, is the

decision there to put, you know, a

safety attendant in the passenger seat

or the safety driver in is that like

your step-by-step process to opening up

a market or is it really just the

regulation in the individual market?

>> Well, it's I think I think even if the

regulators weren't making us do it, we'd

still do that as the as the sort of

right sort of cautious approach to a new

market. So, just to make sure that we're

being, you know, paranoid about safety,

uh, I think it makes sense to have a

sort of

a sort of either a safety driver or

safety occupant in the car. Um, when we

first go to new markets to just to

confirm that there's not something we're

missing. Um, because all it takes is

like one in 10,000 trips to go wrong and

and you've got you've got an issue. So,

um it's it just to make sure like is is

there some peculiarity about a city like

a very difficult intersection um or I

don't know something that's that's an

unexpected challenge uh in in a city uh

for that one in 10,000 situation. Um so

um

I think we we probably could just let it

loose in the in this in these cities,

but we just don't want we don't want to

take a chance. And and and like you know

what we're talking about here is um you

know maybe 3 months of safety driver in

in a new metro to confirm that it's good

and then we take the safety driver out

that that kind of thing.

>> Okay. Okay. And then on on FSD14,

it has a different feel than 13 and it's

also I think a little different than

what it feels like in Austin. Are you is

it basically different development paths

path that you're doing in terms of the

robo taxi stuff versus what you're

dropping to the early adopters? And when

you and when you push these new builds,

is it that you're you're looking for

notable improvements in intervention

rates? um or is that largely solved and

it's more about adding the functionality

like the parking, the drive modes or

just the overall comfort?

>> No, the first priority when we release a

a major new software architecture for

autopilot is safety. So, so it's it

starts off with safety, you know,

obviously safety prioritized and then

we've and then we solve comfort

thereafter, which is why I don't

recommend people take the the initial

version like like that's why I say like

you know most people should wait until

14.2

for before they actually download uh

version 14. Um because by 14.2 we will

have addressed many of the comfort

issues. um the priority is is very much

safety first and then thereafter the

comfort issues. That's why most people

I'm like probably it'll be a little like

it'll be safe but jerky

um and uh we just need time to kind of

smooth the rough edges um and soul for

comfort in addition to safety with a

with a major news uh

autopilot architecture uh change. Um

but uh it really is uh I mean I I I know

what the you know the road map is for

the Tesla real world AI and and at a

very granular detail obviously Ashok is

leading that um and and I I mean I spent

a lot of time with the team going you

know in in

like

excruciating detail here on on what what

we're doing to improve the real world AI

Okay. Um and um like I said this, this

car is going to feel like it is a living

creature and that's with AI4 before even

AI 5.

>> Yeah, the road map is super exhilarating

like it's like so like waiting so much

to like release all the stuff we are

working on. In terms of like you know

what we ship to customers versus robot

taxi, uh it's mo mostly the same.

Obviously customers have some more

features like you know they can choose

whether the car wants to park in a spot

or driveway or something like that which

is not super relevant for robot taxi. Uh

but there's only like a few minor

changes like those ones but the majority

of the algorithms and architecture

everything is the same between those two

platforms.

>> Yeah but as I mentioned earlier like

we'll be adding reasoning to um I don't

know sh is that like reasoning in like

14.3 maybe 14.4 something like that.

Yeah. By end of this year for sure.

>> Yeah. So with reasoning, it's literally

going to think about which parking spot

to pick uh at this. So it's going to say

this is the entrance, but actually

probably there's not a parking spot

right at the entrance if it's a a full,

you know, if the if the parking lot is

fairly full, the probability of a open

parking spot right at the entrance is

very low. Um but actually what it'll

simply do is drop you off at the

entrance of the store and then go find a

parking spot. Um,

but it's it's going to get very smart

about figuring out a parking spot. It's

going to spot figure out it's going to

spot empty spots much better than human.

It's got 360°ree vision. Um, and it's

going to yeah, like I said, just it's

it's going to re use reasoning to solve

things.

>> And fitting that all inside the computer

that has A4 is the actual challenge. And

that's what the team is working on

because obviously you can do reasoning

on the server that takes forever but

then in car you need to make real-time

decisions. Um so fitting all that into

the computer that's in the car that's

the challenge.

>> Yeah that's why I say like like and I

have a pretty good understanding of like

AI you know the sort of the giant model

level with Grock and with with Tesla and

like I'm confident in saying that Tesla

has the the Tesla AI has the highest

intelligence density when you look at

the the intelligence per gigabyte. Um I

think like Tesla AI is probably an order

of magnitude better than anyone else. Um

and doesn't have any choice because that

that AI has got to fit in the AI4

computer. Um but the the discipline of

having that level of AI intelligence

density u will pay great dividends when

you go to something that has an order of

magnitude order of magnitude more

capability like AI5.

Now you have that same intelligence

density but but you got 10 times more

capability in the computer.

>> Great. Uh the next question will come

from Colin at Oppenheimer. Uh Colin,

please unmute yourself when you're

ready.

>> Colin, go ahead and unmute yourself,

please.

>> Thanks so much, guys. Um you know, I

appreciate you bringing up the the

challenges of hand dexterity and

humanoids. um you know along with the

complexity of the supply chain and the

the vertical integration you guys are

pursuing you know I'm just trying to

harmonize the the timeline for the start

of production you know next year with

the current state of the supply chain

and what sounds like a fair amount of

work remaining on the dexterity uh

before you can really freeze the

hardware design and and start to scale

up production

>> um well we're not the hardware design

will not actually be frozen even through

start of production um there'll be

continued iteration um because a bunch

of the things that you discover are very

difficult to make. You only find that

pretty late in the game. So we'll be

doing rolling changes of for the Optimus

design even after solder production. Um,

but I do think that the the, you know,

the new hand is

um an an incredible piece of engineering

and uh,

you know, that's well, like I said,

we'll have um, a production intent

prototype

ready to show off in, you know, Q1,

probably February or March. Um,

and then we're uh,

yeah, we're we're going to be building

a, you know, million unit Optimus

production line. Um,

you know, hopefully with a production

start towards the end of next year.

Um, but that that production ramp will

take a while to get to annualized rate

of a million because it's going to move

as fast as the the slowest, dumbest,

least lucky thing out of 10,000 unique

items.

Um, but it but it will it will get to a

million units and then ultimately, you

know, we'll do Optimus

4, that'll be, you know, 10 million

units. Optimus 5 maybe

50 to 100 million units. I mean it's

really pretty nutty. Um

yeah.

>> All righty. Um that is unfortunately all

the time we have for Q&A today. Uh

before we conclude though, uh Feb has

some closing remarks.

>> Thanks Travis. I want to take the time

to talk about an extremely important

vote which is being held on November

6th. The meeting will shape the future

of Tesla and we are asking you as our

shareholders to support Elon's

leadership through the two compensation

proposals and the reelection of Ira

Kathleen and Joe to the board. Note that

it is a team sport and here at Tesla the

board is an integral part of the winning

team.

shareholders are at the center of

everything we do at Tesla and a special

committee has laid out a compensation

package. Like Elon said, don't we don't

even want to call it a compensation

package.

>> Yes. It's not the point is that I I just

like there needs to be enough voting

control to give a strong influence, but

not not so much that I can't be fired if

I go insane. Um but uh you know, and I I

think that sort of number is in the

mid20s approximately. Um, as a company

that has already gone public, there's no

investigated every possible way to how

do you achieve increased voting control

without um, you know,

um,

is there some way to have like a super

voting stock? But there there really

isn't is there is no way to have a super

voting stock after you've gone public.

Um but for example uh Google uh Meta um

you know many other companies have this

um but they they had it before they went

public and so it sort of gets I guess

grandfathered in. Um Tesla does not have

that. Um, so it's just like I said, I

just don't feel comfortable building a

robot army here and not and then uh,

you know, being ousted because of some

asine uh, recommendations from ISS and

Glass Lewis who have no freaking clue. I

mean those guys are corporate terrorists

and and the problem. So let me like

explain like the core problem here is

that uh so many of the index funds um

the passive funds vote along the lines

of what whatever glass lewis and ISS

recommend.

Now they have made many terrible

recommendations in the past that if

those recommendations have been followed

would have been extremely destructive to

the future of the company. Um but if

you've got passive funds that

essentially def defer responsibility for

the vote uh to Glass Lewis and ISS

um then you can have extremely

disastrous consequences for a publicly

traded company if if too much of the

publicly traded company is controlled by

index funds. It's de facto controlled by

glass lewis and ISS.

This is a fundamental problem for

corporate governance

because they're not voting along the

lines that are actually good for

shareholders.

That's the that's the big issue. I mean

that's what it comes down to. Uh ISS

Glass Lewis corporate terrorism.

>> Yeah. And I would say you know the

special committee did an amazing job in

constructing this plan for the benefit

of the shareholders.

there is no nothing which gets passed

down till the time shareholders make

substantial returns. So that's why you

know in the end I would say I would urge

you to not only vote on the plan but

also vote on all the three directors

because of their exceptional knowledge

and experience and literally you know we

at Tesla work with these directors day

in day out. I mean there is not even a

single day that one of the directors I

haven't spoken to or one of my colleague

hasn't spoken to and we're the even the

directors out here are not just reading

out of you know PowerPoint presentations

they're actually working with us day in

day out so again I just urge you guys as

shareholders to vote along the board's

recommendation. Thank you guys.

>> Great. Thank you VBOV. Uh we appreciate

everyone's questions today. Uh we look

forward to talking to you next quarter.

Thank you very much and goodbye.