Elon Musk Answers All Your Questions!!!

Summary

Podcast Summary: Elon Musk Answers All Your Questions!

Podcast Information:

• Title: Elon Musk Thinking
• Host: Astronaut Man
• Episode: Elon Musk Answers All Your Questions!!!
• Release Date: December 1, 2024
• Description: This episode features Elon Musk, CEO of Tesla, Neuralink, The Boring Company, and chief engineer of SpaceX, answering a range of questions about his companies, innovations, and future plans.

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1. Introduction to the Q&A Session

The episode kicks off with Elon Musk addressing the audience and outlining the format of the session. He emphasizes the focus on long-term value creation rather than short-term production targets.

Elon Musk [01:00]: "This is meant to be kind of more of a long term sort of discussion as opposed to, you know, what will be the production for the rest of the quarter type of thing."

2. Next Generation Vehicle and Production Plans

Rod Lasch from Wolf Research initiates the discussion by inquiring about Tesla's next-generation vehicle, focusing on its deployment timeline and production methodology.

Rod Lasch [02:36]: "Very exciting plans about the next generation vehicle and powertrains and batteries. ... give us some feel for what happens from here. And what's the timeline for implementation?"

Elon Musk responds by highlighting the architectural changes in future vehicles and the challenges of retooling factories without significant downtime.

Elon Musk [02:36]: "The most profound architectural changes will be in future vehicles. Retooling a factory means bringing the factory down for an extended period of time, and that's preferred. Not to do that, I think..."

Further, Harvest Town Foods adds insights into the scalability and implementation of the new vehicle architecture across different plants, particularly emphasizing the rapid rollout in Mexico.

Harvest Town Foods [04:18]: "We expect that to be a huge volume product and yeah, we're going to move that quickly over the next couple of years."

3. Supply Chain and Localization Strategies

Philippe Boucher from Jeffries questions Elon Musk on Tesla’s localization efforts and geopolitical impacts on market share, specifically in China.

George Genorigas [14:39]: "How do you think about long term growth and operating margins... And can you give us any color on the AP4 hardware?"

Elon Musk emphasizes the importance of supply chain resilience and scalability.

Elon Musk [27:15]: "The logistics challenges here are enormous... We can scale production of stationary storage which is much easier to scale than vehicle production."

George Genorigas elaborates on the localization strategy in China, noting that over 95% of Tesla’s supply chain there is localized, leading to significant cost savings and operational efficiency.

George Genorigas [27:58]: "In China, 95% of our supply chain are localized... This gives us tremendous savings on costs."

4. Renewable Energy and Battery Storage Innovations

Ben Kale from Baird inquires about Tesla’s role in accelerating renewable energy adoption through cost reductions in energy storage.

Ben Kale [07:45]: "Is there more that you can do in Tesla to nudge the rest of the renewable industry to speed up?"

Elon Musk responds by discussing the critical role of affordability in driving demand and the importance of expanding refining capacity.

Elon Musk [05:52]: "We need to make just a very giant amount of... lithium hydroxide, lithium carbonate. It's really the refining capacity that is the biggest choke point."

Rod Lasch adds that reducing storage costs and optimizing charging times can enhance the value of renewable energy sources.

Rod Lasch [08:35]: "The more we reduce the cost of storage... the more valuable renewables are."

5. Autonomous Driving and AI Integration

Questions regarding Tesla’s advancements in autonomous driving and the integration of AI are addressed by Elon Musk and Rod Lasch.

Chris [34:01]: "When do you think we'll get a look at the next gen vehicle? Are there any details on size, content, performance?"

Elon Musk [37:55]: "The dry electrode problem is really quite a hard problem... It seems likely that we will be able to scale it to volume this year."

Elon Musk discusses the complexity of AI systems in Tesla vehicles, emphasizing the necessity of sophisticated neural networks to replicate human driving capabilities.

Elon Musk [40:38]: "We have one of the biggest neural net training systems in the world... It looks insane."

6. Market Expansion in China Amid Geopolitical Tensions

George Genorigas raises concerns about Tesla’s market share growth in China amidst rising US-China geopolitical tensions.

George Genorigas [14:39]: "How do you think about a long term growth and operating margins... And can you give us any color on the AP4 hardware?"

Elon Musk reassures the audience about Tesla’s strong foothold in China, attributing success to localized supply chains and cost efficiency.

Elon Musk [15:00]: "We're still growing our market share in China quite strongly... as long as we're needed in this country, I don't see there much of the risk."

7. Operational Efficiency and Learning Cycles

Colin Rush from Oppenheimer inquires about Tesla’s operational efficiency and learning cycle velocity.

Rod Lasch [16:32]: "You can't improve something you don't measure... Once you start measuring things that contribute to operational efficiency, you have a path to doing something about it."

Elon Musk emphasizes the high demand for Tesla vehicles being driven by affordability rather than mere desire.

Elon Musk [17:22]: "Affordability is what matters. This is why we cannot simply double the price of the car."

8. Battery Technology: Dry Electrode Advances

Alex Potter from Piper asks about the progress in dry battery electrode technology, a critical component for scaling cell production.

Alex Potter [35:00]: "How are you trending on dry battery electrode? Any progress?"

Elon Musk acknowledges the challenges but remains optimistic about scaling dry electrode production within the year.

Elon Musk [37:12]: "The dry electrode problem is really quite a hard problem... It seems likely that we will be able to scale it to volume this year."

Rod Lasch highlights the incremental improvements and the importance of overcoming new failure modes encountered during large-scale production.

Rod Lasch [37:55]: "Progress every week. And the team is grinding through it."

9. Managing a Larger Enterprise and AI Concerns

In the concluding segment, Elon Musk reflects on managing Tesla's growth and shares his views on generative AI.

Elon Musk [40:38]: "I don't see AI helping us make cars anytime soon... I think we should need some kind of like regulatory authority."

He expresses concerns about the rapid advancements in AI, advocating for regulatory oversight to ensure AI operates within the public interest.

Elon Musk [42:36]: "It's like that... it's something like that's happening in our brains while we drive around, which is pretty wild."

10. Closing Remarks

As the session winds down, Rod Lasch thanks Elon Musk and the guests for their insights, marking the end of the Q&A session.

Elon Musk [43:16]: "Thank you."

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Conclusion:

This episode of "Elon Musk Thinking" provides an in-depth look into Tesla’s strategic directions, including the development of next-generation vehicles, advancements in battery technology, supply chain resilience, and the integration of AI in autonomous driving. Elon Musk’s candid responses shed light on the challenges and innovations driving Tesla forward, underscoring the company's commitment to affordability, scalability, and sustainability.

Transcript

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[Elon Musk]

The great groundbreaking and opening. So let's see, with that we can move to, I guess, Q and A. We've obviously got significant bench strength here. Should probably have like a bench. And anyway, we maybe have too many people on stage, but we'll try to answer questions within reason. This is meant to be kind of more of a long term sort of discussion as opposed to, you know, what will be the production for the rest of the quarter type of thing. So let's try to orient our questions towards long term value creation. And with that, fire away.

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Rob.

[Rod Lasch]

Hi, it's Rod Lasch with the Wolf research. Very exciting plans about the next generation vehicle and powertrains and batteries. I was hoping you can maybe talk to us a little bit about the timeline for deploying this. And it sounds like it's more than just a vehicle. This is a kind of a paradigm change on how vehicles are assembled, how batteries are put together and everything. And does that also just get reconfigured into everything that you do? So the Model Y's that are being built here will be built very differently in the future. Maybe just give us some feel for what happens from here. And what's the timeline for implementation?

[Elon Musk]

Well, I'll talk a little bit about that, but broadly speaking, the most profound architectural changes will be in future vehicles. Retooling a factory means bringing the factory down for an extended period of time, and that's preferred. Not to do that, I think, but there are variants in how Model Y is produced so we've got variance where there's rear casting, where there's a front and rear casting, and we have the structural battery pack. And then there are a number of smaller improvements that occur. But I think for really, really big changes, those would be future vehicles. Yeah, I don't know. You guys want to add Lars maybe? Yeah.

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So I mean, as far as I agree with you 100%, Elon, it's really easy to put innovations in new vehicles, but long term, we'll obviously bring them back. We've always talked about that. But we don't want to take our factories down as far as the timeline goes. You know, we're going to go as fast as we can, left to right as always. You know, Elon alluded to the fact that Mexico will build our next gen vehicle, but we will also be doing that in our other plants. And so it's really about getting them all up and running. We expect that to be a huge volume product and yeah, we're going to move that quickly over the next couple of years. Let's go to Adam. Thanks. First Enorabuena, Mexico. That's great.

[Rod Lasch]

Congratulations.

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Elon, a question on applying first principles.

[Rod Lasch]

Thinking and innovation to an area that up to now has seemingly been outside.

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Of your control, and that is on mining and extraction of some of the key materials.

[Rod Lasch]

I believe a couple years ago you had a patent on sodium chloride to.

[Harvest Town Foods Ad]

Extract lithium from some clays and spodumene clay and things of that nature. How does that fit into the plan.

[Rod Lasch]

Of maybe bringing real innovation into a.

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Mining sector that could use a little.

[Rod Lasch]

You know, maybe waking up and getting those costs down? Because that could be a roll gating factor, it seems.

[Elon Musk]

Well, we're going to address whatever we think the limiting factor is at any point in time. So we would like to do the least amount possible. So we don't want to get into the mining or refining sector. We will do that if we have to. I do think the, the focus really should be on refining capacity. We need to make just a very giant amount of anode, cathode, lithium, lithium hydroxide, lithium carbonate. It's really the refining capacity that is the biggest choke point. Yeah, so that's why we're building a lithium refinery in Corpus Christi.

[Rod Lasch]

In terms of the mining companies that are out there and looking at that part of the value chain. So we do have large suppliers of lithium right now and we, they are aware of, you know, how we're approaching the Corpus refinery and the technologies we're trying there. And the reason we're making them aware of it is because we think they're fundamentally more scalable. And as we prove them out, we plan to share that with them. Because as Elon says, it's not really like we want to do these things. We're doing them because it's not happening fast enough. So if we can prove that it can be done faster, the intention is to transfer that knowledge to our large, our current suppliers. And the same is actually true. It was actually a clay process that we're playing with and we continue to work on same is true on that. So we've worked with our suppliers as well on trials and we're sharing knowledge there. And the intention is just to help the whole world do this better. And ultimately the this here is getting the lithium or whatever it is out of the ore.

[Elon Musk]

And we're obviously building a cathode processing facility just adjacent to this building. So a little further down the road you'll see another large construction that's for cathode refining. But like I said, we'd really prefer if others did that. We're doing it because we have to know it, because we want to.

[Rod Lasch]

Yeah. And in that case, there just isn't really any large scale cathode production in the United States. And it needed to be done. And again, if we're going to do it, we're going to try to do it from a first principles perspective. So we have tried a bunch of new things there. We're confident that they will work. And as they prove out again, we want to bring them back to our suppliers so that they can build new facilities more quickly with less investment. Right, let's go to Ben.

[Elon Musk]

Hi, Ben Kale from Baird. So similar on the renewable side, is there more that you can do in Tesla to nudge the rest of the renewable industry to speed up since it's such a big pillar of the Master Plan 3 well, I mean, I don't know what more we can do, but I can say that if there's like entrepreneurs out there that want to have like a guaranteed chance of success, it would be refining lithium or anode and cathodes or any materials whatsoever for lithium ion cells as no brainer. Yep. I think we're doing everything we can.

[Rod Lasch]

So, yeah, on the renewable energy thing, the thing that we can do, Tesla, is the more we reduce the cost of storage, the more we reduce the cost of stationary storage. And the more we bring like flexible load to the grid in the form of like cars charging at the right times, the more valuable renewables are because in like Texas right now. I wasn't joking like, or whatever. So, so, so, so, so bringing really low cost storage onto the grid makes renewables more valuable, which ultimately will accelerate their deployment. So that, that's how we focus on it, I guess.

[Tom Zhu]

Y.

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[Tom Zhu]

So I'm just trying to understand as.

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You aim for 20 million units in 2030, how many models do you think you need to get there and how does it fit into your drive to hyperscale?

[Tom Zhu]

How do you manage this?

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And also the fact that probably consumers at some point don't want to see a Tesla or the same Tesla at every street corner. So I'm just trying to get your sense of that. And my other question is on, on bidirectional. I mean, you talked a lot about making a world more renewables and better usage of cars. I think bidirectional charging is one way of better using cars, but you seem to have been reluctant about doing that in the past. So I'm just wondering what your latest views are on the topic.

[Rod Lasch]

Sure. On bidirectional, it wasn't like a conscious decision to not do it. It just wasn't a priority at the time. I think is maybe the way to think about it. As we continue to improve the power electronics in our vehicle, we've found ways to bring broader externality while actually reducing cost of power electronics in the vehicle. And at all things Tesla, the goal is usually to get more for less. And so we are in the middle of kind of like a power electronics retool. I would say that will bring that functionality to all of our vehicles over the next two years, let's say. But it's. Yeah, I guess that's how I'll say there.

[Elon Musk]

I don't think very many people are going to use bidirectional charging unless you have a powerwall. Because if you unplug your car, your house goes dark and this is extremely inconvenient.

[Rod Lasch]

Yeah, most of the value comes in charging the car at the right time. It's not really about sending energy the other way.

[Elon Musk]

Yeah, I mean, if you have a powerwall that can take the house load, then you can use your car as a supplementary energy source to the powerwall. And then you're not going to drive everyone crazy by unplugging your car and having the house go off. So I think there's some value there as a supplemental energy source down the road where if you have a powerwall, you've not diminished the convenience of the people in the house.

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[Elon Musk]

Sorry, what? Oh, how many models? Vehicle models? Not that many really. Ten? I don't know. Not that many. I mean, what's happened with conventional cars is people have run out of things to do. So you run out of things to do, they just end up reshuffling the deck. And you have pretty much the same I mean, how many variants of a car are there on the road? Feels like hundreds. But are they good variants? No, mostly not. They're just variants for the sake of variants. But look at how have things converged with the phone. I mean, there used to be hundreds of flip phones. Now what do we have? It'll be like that.

[George Genorigas]

George George Genorigas from Canaccord Genoti I just had a question about your plans to grow market share in China and also whether or not the political Tensions between United States and China impact your long term ambitions there.

[Tom Zhu]

Thank you.

[Elon Musk]

I don't know. Hey Tom, don't swear too hard.

[George Genorigas]

Yeah, well, well, we're still growing our market share in China quite strongly actually. Especially early this year we had a price adjustment. After that we actually generated a huge demand, more than we can produce really. And as Elon said, as long as you offer a product with value at affordable price, you don't have to worry about demand. That's basically the philosophy that we follow. We try everything to cut cost from supply chain from, improve the efficiency in the factory and pass down that value to our customers. I think as long as we continue to do that, I'm not too concerned about the market share in China. And the second part, geopolitical. No one else. We do our best. We actually create a lot of jobs to the local community and we generally also with at our suppliers, factories will create a lot of jobs as well and we'll contribute a lot to the local economy. I think, you know, as long as we're needed in this country, I don't see there much of the risk of that.

[Rod Lasch]

Colin. Colin Rush from Oppenheimer. You know, one of the things I was struck by in the presentation was the operational efficiency metrics that you guys are talking about. Can you talk a little bit about the velocity of learning cycles and how you guys track that and think about that as an organization as you work into a variety of other areas from an innovation perspective.

[Elon Musk]

Anyone want to try that?

[Rod Lasch]

I mean, I'll say one very high level thing which is you can't improve something you don't measure. And we're like ruthless measurers at Tesla. And once you start measuring things that contribute to operational efficiency, you actually have a path to doing something about it. So I guess the key is a good measuring stick.

[Elon Musk]

Okay. It's something I should say with respect to demand, which I've said a few times over the years, but it sometimes needs to be said again, which is overwhelmingly. The desire for people to own a Tesla is extremely high. The limiting factor is their ability to pay for a Tesla, not do they want a Tesla. It's easy for people in this room to lose sight of that. If your income is far in excess of what a car costs, then you look at value for money, but you do not consider affordability. But for the vast majority of people it is affordability driven. This is why we cannot simply double the price of the car. Or you could say think about things in the limit where if you had an infinitely desirable car but it costs $10 million. It wouldn't matter because most people do not have that. So demand is very much a function of affordability, not desire. Very important. One of the things we weren't sure about was the price elasticity of demand for Tesla. So like, as we lower the price, how much does demand increase? And we found that even small changes in the price have a big effect on demand. Very big. So that was a good thing to learn. Yeah. And then as this autonomy question is very, very big, because you could potentially have, I don't know, five times the utility of the asset that you currently have. So if passenger car is 10 or 12 hours a week of usage plus a lot of parking expenses, an autonomous car could be 50 to 60 hours a week or something like that, and you could get rid of a lot of parking expenses. So, you know, if this is true, then as autonomy is effectively turned on for the fleet, it may be the probably will be the biggest asset value increase in history overnight.

[Rod Lasch]

Emmanuel.

[Elon Musk]

Thank you so much. Emmanuel Rosner from Deutsche Bank. So as you start launching this next generation vehicle and ramping up volume, what will be your nearest term priority in terms of segment or vehicles focus? The slide that you showed with two vehicles on the wrap seemed based on form factor. One of them maybe looks like a van, another one looks like maybe like a smaller vehicle, like potentially a Model 2, I guess. What is the nearest focus for you in terms of ramping up the next gen vehicle? And how do you make sure that by lowering the price point so much because the cost is going down 50%, you're not cannibalizing demand, you know, for your existing vehicles. I mean, demand for our vehicles in terms of desire to own them may as well be infinite. It's indistinguishable from infinite at this point. So affordability is what matters. So as you make the car more affordable, we will have demand go crazy. Basically, the issue is how do we build the cars? The hard part is building the cars. I cannot emphasize that enough. The hard part is building the cars and the entire supply chain that goes with the cars. This is a logistics challenge of extraordinary difficulty. All the things that have to go into the car have to scale with the car while everything is doing an exponential ramp. And if you miss even one of those things, doesn't matter why. Earthquake, flood, fire, revolution. I thought I'd heard them all. I mean, any part of that supply chain gets interrupted, you're now you have a seizure. The hard part is building the cars by far, and the supply chain that goes with it. Do you guys want to talk about supply chains though?

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Well, they might, I think.

[Rod Lasch]

You know, in the presentation I'd mentioned, perfection is a passing grade. We really need everything to happen perfectly. And the strategy for mitigating the different risks, some of which were anticipated and some weren't, is really bespoke to the situation. And really the unique subject matter, expertise and a deep knowledge of the particular.

[George Genorigas]

Supply chain you're managing to come up with those strategies.

[Rod Lasch]

So we've, we've seen everything from, as Elon mentioned, you know, first the tariffs.

[George Genorigas]

That flew back and forth, then the.

[Rod Lasch]

Ocean logistics issue, a chip shortage, Covid.

[George Genorigas]

Floods, there was a fire and a.

[Rod Lasch]

Fab in Japan that knocked down, There was a massive Covid spike in Malaysia.

[George Genorigas]

Where a lot of the chips, the.

[Rod Lasch]

Back end of a lot of chips was down there. And more, this was one that Elon was involved with as well. And yeah, that's, it's nerve wracking, but somehow it works.

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Yeah. And although it's difficult, I think we have been laying the foundation to be as intimate to all the tiers of the supply chain, building that control and, you know, directing the different tiers of supply chain. That's the way we are trying to mitigate the risks that come with it. You know, again, dual sourcing, triple sourcing, having redundancy is the way we've been trying to mitigate for it. Yeah. On that point, when we think about vehicles, when you think about 3Y as an architecture, SX as an architecture, our next generation platform is more than one segment and really we're thinking about all the segments that are available that we haven't captured and where the market would be and designing it with our supply chain partners so that we can go quickly through those segments for where we need. But to Elon's point, if you make a car desirable and affordable, you know, oftentimes it doesn't necessarily matter what segment it's in because it's one that you want. And we've seen that with Model 3, when a lot of people thought the sedan was not going to be a great hit, but we sell tons of them. So the next generation platform is not one vehicle, it is multiple. And it's on the segment that we will really try and focus on the affordability and desirability point moreover than where we started.

[Elon Musk]

Yeah, I mean there's like, I think it's an old saying, like battles are one with tactics, wars are won with logistics. The logistics challenges here are enormous. And when you start being a very Significant percentage of an industry. You can't over capacitize. It's not realistic. And some of these things like you said dual source or triple source, you can do that maybe for small things, but you can't do it for big things because if you're triple sourced and it's like having a plane with three engines where if any of the three engines fails, you crash. It's like, you know, so you have to either overcapacitize which drives your capex up and it has idle suppliers somewhere and big warehouses, or you design to some overage that's you know, reasonable and then you have expedited costs because inevitably there's something goes wrong somewhere and you got to fly things around. So it's really just the rate of progress is the rate at which we are able to scale 10,000 logistics problems. Most significant of those is the cell production. And so we actually deliberately try to overdo cell production or supply to have that exceed what is needed in vehicles. Because if it goes below what's needed in vehicles, then the factories stall. So but then what do you do with all these extra cells? It's like well, okay, so the much easier thing to scale up and down is powerwall and megapack output stationary storage. So we can then over capacitize in cells and packs and scale production of stationary storage which is much easier to scale than vehicle production. So that's strategically I think a good thing. Yeah, I mean the capex for megapack is tiny compared to capex for vehicles. And also megapack demand is quasi infinite. It basically as long as we are competitive with utilities, we can sell as many like it's yeah, quasi infinite demand for that really or multi many terawatt hours. And we got a long way to go to get to many terawatt hours per year.

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Dan, let's go to Dan. Thank you.

[Rod Lasch]

Dan Levy Barclays. I think we know competitive dynamics differ significantly by region. You know, cost dynamics differ by region. We saw that with your China gigafactory far superior cost to what you had Fremont. I realized it was a new factory. But there are clearly different dynamics. So to what extent are the cost strategies that you've laid out today, do they differ by region or is there more of a global one size fits all approach on reducing cost?

[George Genorigas]

Yeah, I think we're pretty consistent under the strategy here. We'll try to as as much localized as possible. Like in China, 95% over 95% of our supply chain are localized all the way from a first tier to second Tier, third tier. And that give us generate a tremendous savings on Cox. And we also have a very localized labor force and we have access to skilled labor force in the region and Yangtze Delta region in Shanghai, I'm particularly referring to, and among over 30,000 employees in China, we have probably less than 20 expats. So it's, you know, very deep localization we have done there to be able to have such cost structure. And we try to replicate this approach elsewhere in different gig factories. Of course, you know, the supplier base are different, the you know, labor market are different region by region and country by country. But we try our best to localize. Yeah. And I think that's absolutely give us an advantage to compete with the auto ems around the globe. Another thing is we have this direct selling mode. Like Zach said, it will save a tremendous money on OPEX as well. We have full control over all the expenditures across the company and we don't spend money on marketing or advertising. Everything we saved will become the value we can offer to the consumers. So on that part we also follow pretty consistent strategy over the years.

[Harvest Town Foods Ad]

I mean, certainly the manufacturing stuff that Colin, Pete and myself talked about, whether you make it here or you make it in Europe or you make it in Asia, it applies everywhere. We think about that, from the ground up, not specific to any region.

[Tom Zhu]

Yeah. Just one thing I would add to Tom's point about localization and to Lars's point here, I would actually say that we're moving in a direction of more standardization in terms of our factories and our processes and our cost reduction approaches. So as we've been thinking about the next generation platform, we've been thinking about the volume that we aspire to build against that, how many individual factories do we need to build and what is the fastest possible way to expand that footprint around the world? What we've done with model Y is each factory is an incremental improvement of the previous factory, which requires engineering hours, engineering, engineering spend for each factory design, and then you end up with factories that are slightly different from each other. And as we move towards the next generation platform, I think the term you use, Lars, is copy paste. So to get it right from the first time, you know, certainly there will be things that we learn and we replicate and we make adjustments to, but try to have as much standardization and commonization as possible, which allows us to go as quickly as possible with exposure. Expansion.

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[George Genorigas]

Thanks. Two questions, one for Zach, one for shock. So for Zach, how do you think about a long term growth and operating margins for the business. And when we look at 150, 275.

[Harvest Town Foods Ad]

Billion in capex, is the remaining balance of that? Is that essentially the capex guidance through 2030 for Ashok, the multi trip reconstruction.

[Elon Musk]

That you highlighted, how is that different.

[George Genorigas]

From what mobileye does with the REM.

[Harvest Town Foods Ad]

Map that they have? And can you give us any color on the AP4 hardware?

[Tom Zhu]

So with respect to operating margins, you know, we intend to continue to improve operating expenses as a percentage of revenue over time and we're continuing to take cost out of our products and try to keep gross margins at a place that's healthy as well. And so you know, from the hardware perspective of the business, you know, it's our expectation that we'll continue to stay in a healthy place over time. And then there's a software portion that's added on top of that. And so Elon has commented on this many times about the impact that full self driving software can have on the economics of the business. And in that space, you know, profitability, operating margins would be impacted dramatically. Specifically to your point about Capex guidance, you know, the intent of that slide was not to provide specific guidance, but to just be transparent about internally what our rough estimates are and to provide context that we think getting to 20 million vehicles per year and 1 terawatt hour of energy storage is very feasible relative to our expected cash generation for the business. That's a number that will move as we learn we may choose to vertically integrate more into things, we may find efficiencies elsewhere. To the whole conversation we were having earlier about do we do mining, do we not do mining? But the entire point is to say that this is something that's entirely possible based upon our forecast.

[Harvest Town Foods Ad]

Regarding the multitude pre construction, my point.

[Rod Lasch]

I was trying to make was that.

[Harvest Town Foods Ad]

We want to auto label most of the data and we can collect data from the fleet and then reconstruct local.

[Rod Lasch]

Areas that can act as supervision for those clips. Since we want to build a scalable self driving system, we don't want to really rely on HD maps or anything, even though we could trivially build something using the same technology. But this is mostly for auto labeling.

[Harvest Town Foods Ad]

And this provides like precise 3D labels.

[Rod Lasch]

For all the video sequences involved in the reconstruction.

[Elon Musk]

Something that's. I don't know if we touched on this much, but in terms of training we have one of the biggest neural net training systems in the world and that we expect to increase that capability by an order of magnitude by the end of this year and probably another order of Magnitude by the end of next year with some combination of Nvidia and Dojo. So, like, much of the scale of that is quite daunt on people. It's enormous.

[Rod Lasch]

Maybe the final two questions, one from Alex and one from Chris. Okay. Alex Potter with Piper. So I definitely want to ask Drew or anybody else up there for an update on dry battery electrode. Right. So if you're trying to over capacitize towards cells, scale, a lot of this, clearly there's a lot of moving pieces and it's a complex sort of orchestra with the supply chain, but a lot of it comes down to dry battery electrode, at least to me. So how are you trending? That was the most fascinating part of the factory tour for. And looking through that window and seeing that this is clearly not a science project. But anything that you're willing to disclose yields progress where you are today versus where you thought you were going to be. Yeah, thanks. Yeah. I mean, as you saw, right, like, this is a real factory making a lot of dry electrode in an automated fashion. We've made a lot of progress. It's a spectrum. Like, we're perfectionists and we have clear end goals, and we are every week that goes by making progress towards those end goals, whether it's speed of the tool yield of that process or the downstream process. We haven't stalled out yet on the rate of progress either. And that's both on the anode and the cathode side. And I think the great thing about where we are with the overcapacity that Elon mentioned is it's giving us the opportunity to experiment as we go, rather than just being stuck to something that we happened to kick off a year and a half ago. And it is here something that Elon has said to the team many times is it's okay to scrap equipment or money. It's not okay to scrap time. So the way we've been approaching it is probabilistically, what do we think is the most likely thing to succeed? And even actually in the factory here, you saw more than one anode line. They are actually operating two slightly different versions of the final process step of the powder entering the tool. And it's a competition, you know, which is going to be higher yield, which is going to perform better. And we have the luxury to be able to do that. And we're taking full advantage of it to advance the technology as quickly as possible.

[Elon Musk]

The dry electrode problem is really quite a hard problem. I mean, we acquired Maxwell really just for the dry electrode technology, but this just illustrates what a gigantic gap there is between something working at small scale and at large scale. And we've had an extremely talented team of engineers working on scaling the dry electrode process and having it be reliable and consistent. And we've been grinding hard, literally and figuratively on this for quite a while. It seems likely that we will be able to scale it to volume this year.

[Rod Lasch]

Yeah, yeah, I mean, we're, we're basically increasing the output week over week. Like roughly 1k a week per quarter is our internal target. And we're, you know, we're tracking to that. I think the, what you saw is effectively like a ton of material per hour per tool. It's kind of like hard to like rationalize like what that really means, but it's, it's, it is, it's different than like, oh, something works in a lab. It's like, well, when it's tons of material per hour, there's just different kinds of problems. Like even if you have like 0.1% escape of like fines into the enclosure that your equipment is in now, you have a dust problem and you, and like that could short out some electronics. It's like just things like this where when you're on a lab scale, you don't even notice it. But when you're doing thousands of tons over the course of months, it's like, oh, a new failure mode we found and that's where we're at. But we're knocking those out though. And the team is grinding through it, but progress every week. And the last question from Chris. Thanks for taking the question. I have a, a few follow ups on the next gen vehicle. First, when do you think we'll get a look at it? Maybe a prototype. Second, are there any details that you think you can share in terms of the size, the content, the performance? And then third, I think you mentioned that you would produce it in other plants in addition to Mexico. Should we take that to mean that you can launch it at an existing plant before you're finished constructing the new plant in Mexico?

[Elon Musk]

I think we'll actually have to probably decline that answer. We will have a proper sort of product event, but we'll be jumping the gun if we answer your questions. Maybe another question if there's. Yeah, yeah, I don't know anyone.

[Rod Lasch]

Will dain off.

[Harvest Town Foods Ad]

I have two questions. This has really been a very impressive afternoon. Thank you so much. Elon, I'm curious as you've doubled and you'll double again, what you've learned about sort of managing a larger enterprise and what you might have to do to manage a bigger enterprise. And then secondly, I'm curious on your thoughts on how generative AI and the rapid breakthroughs in AI in the last months could help you make cars sort of less hard to make. Thank you.

[Elon Musk]

I don't see AI helping us make cars anytime soon at that point. I mean, at no point, any of us working big problems just chill out. I mean, I'm a little worried about the AI stuff. I think it's something, I don't know, which we should be concerned about. I don't know. I think we should need some kind of like regulatory authority or something that's overseeing AI development and just making sure that it's operating within the public interest. And, you know, it's quite a dangerous, quite a dangerous technology. I fear I may have done some things to accelerate it, which is. I don't know. So, I mean, some of the AI stuff I think is just obviously useful, like what we're doing with self driving, which is, you know, some people think is an AGI type problem. I don't think it's quite an AGI problem. But it certainly requires very sophisticated neural nets because the road system is designed for eyes and biological neural nets. So naturally the analog to that is cameras with digital neural nets. And yeah, the thing we found is if you actually look at our neural net architecture in the car, it's kind of insane, frankly. Nets upon nets upon nets upon nets.

[Rod Lasch]

Yeah, the visualization tool crashes when you open.

[Elon Musk]

Yeah.

[Rod Lasch]

Because it's like so complicated.

[Harvest Town Foods Ad]

No one can visualize this right now.

[Elon Musk]

Yeah, it's hard to visualize. Just like literally it looks insane. So I guess something like that's happening in our brains while we drive around, which is pretty wild. So, you know, I don't know, like, Tesla's doing good things in AI. I don't know. This one stresses me out, so I don't know what to think, to say about it.

[Harvest Town Foods Ad]

Okay.

[Rod Lasch]

Given it's 7:00, I think that's all the time we have. Thank you very much for coming.

[Elon Musk]

Thank you.