Tesla (TSLA) Q2 2026 earnings call transcript

Welcome to the second quarter 2026 Q&A webcast. My name is Travis Axelrod, Head of Investor Relations, and I'm joined today by Elon Musk, Viva Vataneja, and a number of other executives. Our Q2 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 We have a lot of risks and uncertainties, including those mentioned in our most recent filings with the SEC.

During the question and answer portion of today's call, please limit yourself to one question and one follow-up. Please use the raise hand button to join the question queue. Before we jump into Q&A, Elon has some opening remarks. Elon?

Thank you. So, yeah, it's been a great quarter. We achieved record Q2 deliveries. Model Y, I believe it's now, I think it's the best-selling car of any kind in the world and is setting records across the board. So its popularity is increasing tremendously. And we're seeing in locations that have FSD approved, we're seeing a very high tick rate of FSD. And in fact, I think for a lot of people, they're actually buying Tesla full self-driving with a car attached as opposed to a car with FSD. They're coming into our stores in the US and saying they want the full self-driving with whatever car it comes with, essentially.

So clearly, this is a significant demand driver. And as we get approval for FSD in different countries, I think we'll see a similar uptick in demand. So, yeah, it's looking very good on that front. The energy business is also growing incredibly fast and I think will be crucial for the scale-up of artificial intelligence data centers.

We're investing a lot in growing the core business and really preparing for the future. So this is a massive CapEx year, but I'm confident that all the things that we're investing in will yield incredible returns. Really, the best CapEx returns that we've ever seen. And the TESA team has performed incredibly well. The SaabCab has started production, and we also have started production and a ramping in, we will soon start production with Optimus. We have started production with the TESA semi-truck. We will soon start production with Megapack 3. We've started production with the lithium refinery, the cathode refinery. We're scaling up. Battery cell production, and we're also preparing to do a massive solar panel, like solar cells and panel production.

Actually, this is going all the way from silicon refinement to producing the solar cell and then deployment of solar because there's going to be tremendous need for electricity in the future due to electrification of transport and AI, obviously. So we're working on what we believe is the most ambitious build out of advanced infrastructure manufacturing capacity ever in history. It's a big deal. So with a rubber taxi, our goals are very ambitious for a rubber taxi, but we do need to be cautious about causing any accidents or causing I'm not saying any harm to anyone. Although there are, I think, 30 to 40,000 automotive deaths per year in the United States alone, most of those do not generate any threats.

You don't really read about almost any of those. But if we injure even one person, it will be worldwide headline news, and regulators will immediately clamp down on our activities. So, and we don't want to injure anyone. So, so we're going as fast as humanly possible in scaling Robotaxi, but with, while trying to ensure that we do not harm anyone at all, and ideally do not even run over a pest. So that's really the constraint is where we want to go as fast as possible with Robotaxi without harm to anyone. And we're providing live updates for RoboTaxi launch as we open up in the city. We immediately post that on X. So just follow the Tesla account on X. We'll keep you informed as we scale to new cities.

We've opened up in a number of cities in Florida and in Texas and obviously in the Bay Area. So we'll continue to scale, I think, very, very rapidly on quick-width. It looks like more than 10% a week in terms of miles driven. So it's a very high compound growth rate. So, let's see, Optimus, as you've heard me say before, I think Optimus will be the biggest product ever. But it is a very complex problem to solve. It's one of the hardest things to solve, to make an autonomous humanoid robot that can do tasks that you simply ask it to do something or show it a video, it can do the task without any programming. Like no one's ever achieved this.

And you've got, there are many challenges in the electromechanical design of the robot to achieve sufficient dexterity and also be very reliable and have a long wear and tear. But meaning it needs to be out in the field and not break down. Otherwise, you've got sort of a 70 kilogram robot that just flopped over and you've got to carry it like a carry it out like a body. You know, there's no wheels.

So and we don't want Optimus to go haywire. So. It's a it's a lot of work to scale, to get the design right and to scale production. And I really want to emphasize here that the production scaling challenge is very substantial. This is going to be the hardest product to scale manufacturing that we've ever made at Tesla because everything on the robot is new. And the difficulty of scaling the production ramp is proportionate to the newness of the parts in the robot.

And, you know, at least with electric cars, the non-electric powertrain portions of the cars had an existing supply chain. So you could go to existing suppliers for wheels and side mirrors and windshield glass and that kind of thing, body panels. And with Optimus, there is no supply chain. So we've had to build up a supply chain in its entirety or in-house the production. We actually have in-house a tremendous amount. The Optimus production line that we're building out in Fremont in place of what used to be the Model SX production, it looks incredible. It's quite stunning to see.

So I just want to make sure to calibrate people correctly. Artruss will follow the sort of normal S-curve of manufacturing, of a manufacturing ramp, but the initial portion of the X-curve will be quite flat and long because of the newness of the parts in the robot. So, you've probably seen lots of impressive demonstrations of robots on the internet, but those demonstrations you're seeing are pre-programmed or remote controlled. So, there is no humanoid robot that is actually able to do generalized tasks. Optimus will be the first one that is capable of doing that. Where it's not just a demo, it's genuinely useful in day to day life. And Optimus is designed to have full human dexterity, so a hand that has the same level of dexterity, if not higher, than a human hand.

And the human hand is an incredible thing. The more you study the human hand, the more amazing you realize how amazing hands are. It's more than just opposable thumbs. I mean, the nuances of how human hands work are amazing. The closer you look, the more amazed you are. And an optimist will have that capability. You'll have human and then superhuman dexterity. So it's really going to be quite something. Let's see, TeraFab, you know, with TeraFab, we expect to announce the location soon and provide more details about our plans in that regard, which we'll leave that to the product, sort of the launch announcement rather than try to squeeze it into an earnings call, because I think this is a very big announcement and it deserves to have its own sort of stay in the spotlight and not be sort of I'm going to squeeze into an earnings call.

But I do think TerraPath is going to be an amazing initiative and a necessary one, and one without which we will be constrained in our ability to scale Optimus production because we simply won't have enough AI chips. So it's crucial to solve that, and we'll have to solve memory, logic, and packaging in order to scale Archivest. So, anyway, like I said, we'll leave that to its own announcement. We've placed equipment orders for our development fab in Austin, and that development fab, I think, is pretty cool, It's pretty cool because it's intended to have lithography mask production and then logic, memory, and packaging, and chip testing all under one roof. So you can have a very fast iterative cycle and try out new chip designs very quickly and see if they work.

I don think such a building exists anywhere on Earth So this is really going to be super helpful as we try some exciting adventurous high high bets on AI chips So they focus, like I said, on primarily Optimus, like how do we make Optimus as useful as possible. possible. And then we have like, we have digital optimist, which is basically driving a computer screen, I guess you could call it computer use or something like that. But driving a computer screen, the same way you drive a car. So for the car, it's sort of pixels in or photons in and controls out. The same thing is true for optimists, digital optimists, it's photons in and controls out.

So we feel We are more confident we can adapt the same Tesla AI technology that we developed for self-driving cars to have a self-driving computer screen, a self-driving computer, essentially. So the self-driving computer where the Tesla, the very low cost, the AI for computer can handle all of the sort of short-term tasks. They're doing real-time video control of the screen of the computer. So it's not like screenshots. Everything is real-time video at high frame rate. And digital optimists will be important, obviously, for physical optimists because physical optimists needs to be able to operate computers. It can't come up to a touchscreen and not know what to do. It's got to have a generalized touchscreen and computer use capability.

So that's looking promising. This is in partnership with SpaceX. SpaceX's Gronk. So the big model that is kind of like the manager of Digital Optimist and kind of tells Digital Optimist what to do, provides it with a series of tasks, and then Digital Optimist goes and does those tasks.

We're also building out a Megapod design that has Tesla AI4 computers with x86. It's a pairing x86 computer with the Tesla AI4 computer in a box. It's got this digital optimist in a box and in a Megapod, kind of like the Megapack packaging, where we put just a large number of AI 4 plus x86 combos in a giant box, essentially. And these boxes can be placed anywhere in the country or outside the country. And this allows us to scale AI compute using disaggregated electricity production. So there's lots of places all around the world, including in our superchargers. I think we've got something like seven gigawatts of power at our superchargers and growing. And we can place Megapods at many of these supercharges and have distributed power for AI.

So I think that could be quite a big deal. So in conclusion, we're super excited about our autonomy and robotics roadmap. There's so much awesome stuff coming. It's like I said, hard to squeeze into an earning school. But we'll have a lot of product announcements. And this is going to be a great year for Tesla, I think, one of our best years ever. And then I think next year will be even better. So in conclusion, I want to thank the Tesla team for their excellent execution and all of our supporters for joining us in this journey. Thank you.

Great. Thanks so much, Elon. And now Vibov has some opening remarks.

Thanks, Travis. So Q2 continued the trend that we saw at the end of Q1, a resurgence in demand for vehicles across the globe. We achieved record Q2 deliveries globally with sequential growth across the Americas, APAC, and EMEA of 60%, 27%, and 12% respectively. Additionally, Model Y set records in several key markets, including the Netherlands, Australia, and New Zealand. The efforts of the Tesla team to create compelling products at a reasonable price with the capability of autonomous driving are coming to fruition.

We exited Q2 with our largest order backlog since 2023. We are therefore focused on increasing production at all our factories to meet this growing demand. Production growth will be limited by our supply chain. This includes not just batteries, but also electronic components. We've been here before, and like always, our Tesla team is working actively to unblock the obstacles ahead by securing strategic deals with suppliers.

Like Elon mentioned, one of the key factors for vehicle demand has been FSD. Our sales data suggests one of the main reasons consumers are coming and looking at the car is because of FSD. In Q2, we had in North America, about 55% of our deliveries had FSD subscription at the time of delivery enabled. Overall, FSD attached rates continue to improve, reaching nearly 1.5 million paid customers globally, of which 55% is upfront purchases and the remaining 45% is subscriptions. We expect that the bulk of the growth in FSG monetization will come from subscriptions as we've removed the purchase option in most markets.

Automotive margins, excluding regulatory credits, declined sequentially from 19.2% to 16.3%. As a reminder, we had highlighted in Q1 that we had a $230 million benefit from warranty true downs and some tariff relief, which did not repeat in Q2. Controlling for the impact of those benefits from the prior quarter, our automotive gross margins, excluding credits, would have been approximately flat. This demonstrated the effective pricing and cost management done by the Tesla team as we continue to drive demand.

Commodity price increases and interest rate changes all continue to add to our costs. Note that interest rate subvention costs are recognized upfront as revenue offset. So as interest rates have risen this year, the cost of subvention has risen along with them, which had a negative impact on automotive margins. As we have previously noted, energy business is inherently lumpy. Deployments are tied to customer timelines and largely out of our control. In Q2, we deployed 13.5 gigawatt hour of energy storage, a 53% sequential increase, and the second largest quarter for energy business. Despite this growth, energy gross margins declined from 39.5% to 20.4%. This margin decline was a result of several dynamics.

First, there was a warranty true-up in the quarter of about $240 million related to certain vendor cell issues for our legacy deployments. Also, the tariff benefits we recognized in Q1 of more than $200 million did not repeat. And lastly, we had previously guided that ASPs for industrial storage is coming down amidst growing competition. Long term, we believe the energy business should normalize at a gross margin rate in the mid to low 20% range. Our order backlog of this business is robust, and we are doing our best to build based on both existing demand and future demand we expect from data center growth and overall electrification of the economy. Service and other margins improved sequentially from 9.2% to 14.1%, an all-time high.

This was mainly driven by an uptake in volume and better cost management of our vehicle fleet that supports businesses such as used car, supercharging, service centers, and insurance. While marginal today, also included in this business are deliberate investors we are making in infrastructure We continue to grow the Tesla robotaxi fleet and have expanded to a total of seven markets in the U. S. We expect the ramp of the fleet to accelerate throughout the year along with expansion into new U. S. markets. As previously guided, operating expenses increased sequentially. The increase came primarily from significant research and development related activities, including pre-production ramp costs, Pre-production ramp costs for new products like the SemiTruck, Optimus, CyberCab, and other AI initiatives, as well as depreciation for an additional compute that we brought online.

Additionally, we had charges related to litigation expenses in the quota. Note that we are in a big investment cycle and expect our operating expenses, largely driven by R&D, to continue to grow in 2026 and beyond. Net income was positively impacted by a mark-to-market gain of $1 billion on our SpaceX holdings, which was offset by losses on FX of approximately $300 million and on Bitcoin of about $100 million. As previously guided, our free cash flow ended up being negative for the quarter. Most of the reason for it going negative is because CapEx more than doubled sequentially, and we expect it to increase further in the second half of 2026. We continue to expect that CapEx for this year will be more than $25 billion.

CapEx will grow for the next two or three years as we expand our robot taxi fleet, expand our production capacity for Optimus, make investments for semiconductor fab, Install solar manufacturing capacity and AI compute infrastructure, in addition to all the other expansions we'll do for other manufacturing for automotive. In addition to using our cash for such investments, we are being opportunistic in securing certain debt facilities that will give us the capacity to borrow up to $30 billion to help accelerate such investments.

We believe this is the right strategy to position the company for the next era. And we'll always make such investments in a very capital-efficient manner.

The path to amazing abundance is ever-challenging and requires making bold bets. Our progress will be non-linear. The future is going to be great, and we are ready to rise to the occasion. I would like to end by thanking the Tesla team, our customers, investors, and suppliers for their confidence in us on this journey.

Thanks so much, Vibov. As everyone on the call may have noticed, we've covered several of the say. com questions already in opening remarks, including Optimist Production, TerraFab, and Digital Optimist. Ashok is joining us today, our VP of AI, and he's to cover questions related to Robotaxi. Ashok?

Thank you, Travis. Many of the questions on say. com relate to Robotaxi deployment and scaling, so we thought we'd provide a comprehensive view of where we are now, and where we are going in the future. First of all, I'd like to state that the robotaxi program has been operating extremely well. Especially in terms of safety, the program has had an impeccable safety record. We have driven more than 380,000 miles of unsupervised robotaxi, now across six cities in two different states. We have had zero notable incidents. Any reports have been of other actors impacting us when we were stationary. Again, I like to emphasize how safe the operation has been so far. Zero notable incidents over 380,000 miles.

Historically, the so-called experts have always claimed that you need LIDARs, radars, HD maps, and the entire kitchen sink to drive safely. Here we show that such is not true.

First, you can have safe, comfortable, and affordable autonomy with just cameras. This record should be a huge validation of Tesla's entire AI approach. Second, I'd like to discuss scaling. We started the Robotaxi program roughly a year ago in Austin. We had safety monitors in the passenger seats of the cars back then. Around the end of last year, we had the first fully unsupervised Robotaxi in Austin.

Since the beginning of this year, we have grown at double digit growth rates to the number of unsupervised miles that the fleet drives every week. I repeat, we have grown at such a high compounding rate on a week over week basis over the last several months. Not only that, we expect to continue growing at such a large rate through the rest of this year. The other thing to note is that for expanding to new cities, it has been relatively less effort on our front. We expect that the time to launch to a new city will continue to trend towards zero, towards an end where we operate in entire states as a whole, instead of going city by city.

Such growth was only possible because we have a world-class engineering team at the Frontier AI development here at Tesla. The currently operating Robotaxi fleet is already running early versions of the V15 FSD software that we had referred to in the past. For V15, we have planned roughly about seven major improvement tracks, and they're all happening in parallel.

The early V15 builds that are running on Robotaxi have already 40% of those tracks merged together, and that's what's running in the fleet right now. As we continue to complete our work on V15, we will see that the card is going to be ridiculously safe and capable. We're already seeing internal signs that all of these bets that we have made for technology improvements are all starting to work, and we expect that the payoff will be huge, and that's what is going to help us sustain the same growth rate through the rest of this year and so on.

Finally, regarding the CyberCap, first of all, it's a phenomenal product. Anyone who writes in it instantly falls in love with the experience. We have aligned our manufacturing targets to roughly match the projected growth rate of the unsupervised miles. The same V15 models that power Model Y and other platforms will also work on CyberCaps. In conclusion, Robotaxi growth so far has been literally exponential while keeping an impeccable safety record. Our technology bets are paying off, helping us sustain the exponential growth for the foreseeable future, and the CyberCab is going to be awesome.

That's great. Thanks so much, Ashok. And there was one remaining question on data collection for Optimus training. Would you mind covering that as well?

Yep, definitely. Regarding Optimus, especially Gen 3, Optimus has been designed to not just match the appearance of human beings, but also the functionality and dexterity of humans.

One of the main reasons for this approach is that having the human form factor and function allows us to learn from humans on how to perform a wide variety of tasks. This opens up the entire world to provide data for training Optimus. Just like FSD, we have access to a broad fleet of humans giving us data from all of the workers at our factory. Optimus can learn quite a bit from observing them perform their tasks at the factories. We also have a dedicated data collection team who can provide relatively small amount, but of very high quality demonstrations to do the post-training of these models.

This is all on top of any training we can do off of the entire internet of data that shows demonstrations of people doing various tasks, both in industrial settings and home settings. The second flywheel is when we have a large number of Optimus robots practicing their tasks in what we call the Optimus Academy The data from the bots experiencing the tasks themselves will be invaluable and help us close any minor form factor gaps that may exist between the bot and the humans This is also when the reinforcement learning loop kicks in, where the bot initially attempts some tasks, fails sometimes, learns from both the successes and failures of those tasks, and eventually learns to master those tasks at perhaps a superhuman level.

Our AI strategy for Optimus is aligned with the same. It's the same end-to-end strategy that drives FSD, pixels in, controls out. And just like FSD, we expect it to work broadly. In FSD, you know, you can get in the car, type in an address, and then hit start, and it handles all of driving from park to park. And the same thing is going to be true for Optimus as well. You're going to just ask it to do anything, and then you should just perform the entire task on its own without you having to do anything along the way. And it's the same team that produced FSD, you know, the V12, 13, 14, and now V15 software that now works on Optimus as well.

And so I'm very confident that Optimus will have been an extremely capable robot. Great.

Thank you so much, Ashok. So that covers the say. com questions. And now we will move over to analyst questions.

All right, we're not getting any audio from Tom at the moment, so we will try to move on to Andrew, and we'll add Tom back to the queue to come in next. So, Andrew, as soon as you can, please unmute yourself and ask your question.

Elon, you may be on mute right now. We can't hear you.

Yeah, our supplies have been great, and they have made an arm making tremendous investments in support of Optimus and RoboTaxi and whatnot. But, you know, Samsung and TSMC in particular are building fabs, TSMC in Arizona and Samsung in Texas, and putting in tens of billions of dollars to build AI compute for Optimus and Robotaxi.

Panasonic has also invested many billions in increasing battery cell production. I'm a little under the weather here, I'm a bit ill, so I sound a little off, I'm kind of struggling, so I'm a little bit ill today. So, yeah, but our partners have been great, and I'd like to thank them for their support and their investment and their hard work.

And maybe just to the follow-up.

Oh, sorry, Andrew, we're going to have Karn hop in here for additional call briefly. Yeah, just to add to Elon's point, the Samsung fab, that's going to be pretty significantly dedicated to future projects. That's a massive investment, multi-billion dollar. We're seeing the same level of investment going to memory, and also new specific metal injection molded parts, flexible printed circuits, and all sorts of non-linear technologies that are more based for the robot as opposed to the traditional vehicle supply chain. And in certain cases where we don't find a great partner, we've never hesitated from insourcing it.

And we have a very capable manufacturing engineering team and a design team that helps us scale those things. Yeah, and actually, I'd also like to thank Micron for giving us memory allocation.

They're going to make some very tough decisions on memory allocation. And we really appreciate Micron making room for Tesla in the years to come and giving us actually a very significant allocation on reasonable terms, given the pretty insane pricing of memory these days.

Great. We really appreciate that, that caller.

What do you want to see to make sure that this is done in a proper way? And we've got Lars on the line. Lars, if you wouldn't mind covering this one, if you can.

Yeah, sure, Travis. I mean, I think, you know, we talk about regulation, particularly in the U. S. , we've made a lot of headway. And, you know, just good initiatives from the federal government in terms of FMVSS rules, moving towards, you know, acceptance and adoption of purely built AVs. And I really appreciate the support from NHTSA on that.

When it comes to like a state-to-state level, obviously the stuff in New Jersey, you know, is a little bit disheartening. I think ultimately, as Ashok said in his opening remarks, we really focus on the performance of the vehicle. And ultimately, that's what's going to drive regulators and the public to adopt it. I think the best regulations are those that provide companies and innovators with a goal or a task and allow us to figure out the solution.

And when we see regulations that provide a solution before identifying a problem, we really don't appreciate those. But as Tesla always has and will continue to do, we'll let our performance speak for itself. And I think I should play that out really clearly, and that will be the foundation of our expansion moving forward.

Great. Thanks for the questions. Thanks so much.

Yeah, we expect to be both integrated with robotaxi as we are in the rest of our business. So I don't think we're going to have any demand challenges with robotaxi. So this is, but the economics will be so compelling that I think we will really have a lot more desire to use the service than, you know, like, I think demand will ask for our ability to service The demand. And so obviously you just can just go vertical in that situation. So it's really just about going through what we call the March of Nines of reliability, where you need like how many Nines of reliability do you need to scale? Ideally you want 99.999999% reliable. And so that's the, it's just the marginalized of reliability.

I think the only thing really constraining our growth in road taxing.

Great. Thanks, Ilan.

Well, I mean, as you can tell from the many collaborations on so many fronts with SpaceX, there's more and more overlap, especially with TerraFab. That's really going to be a gigantic project. So, but obviously, we can't talk about combining companies and that kind of thing. On an earnings call, it's just got to be done with the appropriate process.

And with that, I'll turn it over to Brandon, our general counsel. Thanks, Elon. And that's exactly right. We continue to benefit from our relationship with SpaceX, and they've been a great partner, and we have numerous beneficial transactions with them.

And earlier this year, we deepened our relationship through an investment and a framework agreement. This will allow us to continue to work with them on projects that Elon mentioned, like TerraFab and DigitalOptimus. Yeah, and there's many other things, too. Obviously, you've got Grok in the car, and Grok helping drive DigitalOptimus. You also got Starlink being integrated into the CyroCab and Sonic will be integrated into all our vehicles, at least for markets that Starlink is active.

Because for a robotaxi situation, you need to have coverage everywhere. There are many, many, many places, even in Silicon Valley, where the cellular coverage is terrible, sometimes non-existent, which is surprising for Silicon Valley. But I know when I drive to work, the first 10, 15 minutes, I can't actually do any calls because the cellular connectivity is so bad. So we can't have robotaxis getting stuck in these, like, Bermuda triangles of lack of cellular connectivity. So Starlink with its ability to do connectivity anywhere is actually quite important. So we don't have, you know, robotaxis missing in action.

And then obviously if people are sitting in the car, they're going to want to do high productivity stuff or entertainment. And with Starlink, you can watch, you know, 4K live sports in the car. And with very low cost per gigabyte of data, that's really not feasible via the cellular system.

And there's many other situations. Yeah, I mean, I would say, think of it like Ashok was mentioning about CyberCap, right, that the experience is great. In a world when you don't have to focus on driving, you have all the time in the car to do, whether it's a conference call, I will watch a movie or anything. That's why if you look at the CyberCap design, it has a big screen. And, you know, we've started doing CyberCap rights in our factory in Austin. And when you go through that experience, you, I mean, soon customers will be able to do it in not too distant future. And then you'll understand why that connectivity becomes so important.

Great.

What sort of is the roadblock to sort of adding more vehicles on the ground? The reason we have been expanding across different cities instead of just doubling down a single city is that we want to make sure that our stack is a very general one. It is a general one. We just want to, like, you know, both fruit ourselves and other folks that it is working across a lot of different cities without too much effort per city. And that's what we see internally. And then, as Elon mentioned earlier, the growth rate has been literally exponential. I'm sure just it's an early part of the exponential. That's why it's hard for others to comprehend. In terms of like miles versus the vehicles, since these vehicles operating the robot taxi fleet drive basically continuously, as opposed to human drivers who use vehicles for maybe a couple hours a day or something like that, these vehicles are in mostly continuous operation, which means that even for a few vehicles, you can get a lot of miles out of them.

And that's why we are tracking the amount of unsupervised miles or just the number of vehicles or something like that. And we want to be operating in a very efficient fleet. So all of the work that goes into the efficiency makes it even more so that we get a lot of miles per vehicle available in the fleet.

Yeah, and just to add further to this, I'm like, think of it, we're trying to scale this, and we're trying to make sure that there are different kinks which would be there, and there are things not just on the software front, on the operation front, which we're also trying to tackle.

So that's why we're trying to have a broader footprint to try and make sure before we go really high in terms of deployment that we are able to sort these things out in a smaller fleet in a controlled manner. Yeah, one of the things for cyber cab should be noted is because it is a new vehicle chassis, we need to accumulate driving data that is specific to the cyber cab before we can put a lot of them on the road.

So unlike, say, Model 3 and Model Y and our other vehicles, we've got a lot of vehicles on the road, millions of vehicles on the road. I think we don't have that for cybercabs, so we actually have to accumulate miles with cybercabs that are retrofitted with steering wheels and acceleration braking battles, that kind of thing, to calibrate to the cybercab chassis. So you'll see, as we are confident about that, the number of cyber caps in cities will increase dramatically.

Great.

Yeah, go ahead, Lars. I can just add one thought here. The other reason I just want to point out is, you know, transportation, like TCO, transportation, regulatory situations are different city by city, state by state. It is not a federal framework to do that. And so the reason we're expanding city by city is to make sure that we're meeting all of those one at a time, and we're satisfying all of the requests of each individual city and everywhere we can. So we have to expand to each city to meet those requirements, and we'll continue to do so. And to all of what Ashok and Vyvalv and Ashok said, we'll follow with the scaling.

Thanks, Lars.

But is there other things that you need at the federal level to really kind of unlock your ability to ramp CyberCap?

The short answer is no. I mean, I think we have a great relationship with Nitsa and Administrator Morrison especially.

And, you know, I think they're just following through with what the public wants and the world knows is coming, and they're trying to stay ahead of it and make sure that, you know, they're doing the right things in place. So, you know, we've been open and honest with them for the last couple of years about what our plans were and what we're doing. And, you know, I don't want to say we're in lockstep, but, you know, I feel like we have a partner there, and we're working together on it.

Yeah, absolutely. As you alluded to, there is a really serious shortage of truckers. So there just aren't enough people who want to drive trucks, which are crucial for transport throughout America. So an autonomous semi is actually going to be very important to address the shortage of truck drivers. And also will be great for improving safety and making it easier on truck drivers to have a self-driving semi is going to dramatically improve safety and comfort for truck drivers that use the Tesla semi. Since the total number of units of the TESA Semi is still low and will continue to be a very small percentage even by the end of this year of our total vehicle fleet, it makes sense for us to focus our self-driving efforts on our high-volume vehicles, so Model 3 and Y, and solving self-driving and really getting to the point where it's a generalization.

So we expect to get self-driving working on the Tesla Semi probably around the end of this year or early next year. And I just don't want it to be a distraction on the March of 9th of 2021. We have a lot of safety for self-driving on 3-way and CyberGab. It's taking a bit of a backseat for the next six months or so for autonomous semi, but it will definitely be a bit working next year and in time for the scale up to high production of Tesla somewhere. For communications, I think there's an interesting angle there where you could use the Starlink terminals that are in the Tesla cars as cell towers, I suppose, or connectivity towers, basically for providing relays on the ground to cell phones and to Anyone who would like Wi-Fi, basically.

This is a different subject, but obviously we could do that with the stationary starting terminals too.

When we think about microprocessors, microcontrollers, actuators, and other semiconductors that are going to be used, it occurs to me that you have many that are commercially available. You have an option to design some of them made at third-party fabs. You also have the option potentially to design and make them yourself. What should we think about your propensity to source these components in these different manners? You're talking about making microcontrollers and the various computers that are in the car that operate the steering system and the braking system? No, I'm talking about for Optimus, not for... Yeah, Optimus has a lot of really specialized power electronics and so forth. It's all TESLA design stuff, but it is fabricated by suppliers.

For Optimus 4, which will be built in Austin, that will be a much more vertically integrated As the supply system for Optimus 4, and that would, you know, we'd aim to have an order of magnitude more production of Optimus 4 than Optimus 3. So sort of aspirationally 10 million units a year versus a million units a year of Optimus 3.

But, you know, with all the caveats there, which is insanely difficult to scale production.

I think it's going to make sense to upgrade all cars that have less than hardware for almost all, any cars that have cameras, basically, because otherwise it would be probably too many modifications. But anything that's got sort of, that's set up for cameras, it will be financially sensible at some point to upgrade them. But I think we'd want to upgrade them to the next generation of, you know, like next generation AI board. So it would be either like we haven't upgraded AI for a chip that's sort of a medium, sort of a moderate improvement over AI for probably reaches production around the middle of next year. And then there's also AI5, which hopefully is in volume production around the buildup next year.

AI5 will initially go into Optimus. And actually making very good progress. The TESLA chip team is really doing great work and making incredibly fast progress on AI5. And I'm very excited about the design of the Tesla AI6 chip. I think it's going to be the best edge computing chip in the world.

And if somebody's got a better one, I'd like to need that person to shake their hand because the AI6 chip is just so good.

So I think we've got things going really well on the chip front. And again, I'd like to thank our TSMC and Samsung and Mike Brown for their support.

Great. We are coming up in the hour, but we're going to try to squeeze Dan in from Barclays.

And to what extent is the pace of CapEx really the primary determinant right now in unlocking the different supply constraints that you have? Yeah, it's a good question. I've actually, you know, what I've asked the team to do is like, really, we should be spending on CapEx as fast as we can spend as fast as we can without it being too wasteful. So we're not trying to aim for like some extremely high efficient efficiency capital spend because that would slow things down. So it's a balance between how much capital efficiency versus time.

So if we can be, it's okay to be a little less capital efficient if we get things done sooner, because that's actually going to be the higher MPB outcome for the company. So, overall, I'm pretty happy with how things go. I mean, we're doing an incredible amount of construction and production growth in so many different arenas simultaneously.

I don't think there's ever been a company that's done this at the scale, you know, but maybe proportionately back when Henry Ford did the Model T or something like that, but then World War II when, you know, companies were Making, it has to sort of scale up weapons for reference production, but I think probably this is the fastest industrial scale up since World War II in America.

Yeah, and I will just add a little bit on that. Basically, if you look at it, you know, all our spend on CapEx is trying to do productive assets, right? We're basically scaling factories, whether it's Optimus, whether it's CyberCap, whether it's LFP factory, which went into operation earlier this year, or the semi-factory, or even putting in a semiconductor fab in there, as well as, you know, we are trying to get a lot of solar manufacturing in the U. S. In fact, our plans...

Yeah, very important. Yeah, this is underrated, by the way.

Yeah. Basically, you know, the amount of solar manufacturing which happens in the U. S. , we're just going to multiply it with an order of magnitude. And none of these things are easy, right? Because what you have to do is, in order to build a factory, you have to start from ground zero. So just so you know, again, I don't think we have shared this. We end up being the general contractor for almost all our construction facilities because we are doing that much construction.

And so going back to what Elon was saying, we're going at a very rapid scale. And yes, you know, this means that we are doing a lot of things all at the same time. And that's why, you know, we just have to go as fast as we can, humanly fast, make things work in the real world.

Yeah, our CapEx efficiency, I think, is off-scale, Pedro.

Well, it's not just peak-shaving but also grid-balancing. Not just like the facts are on briefly, but for balancing power from wind generation and solar generation, batteries are awesome. I mean, the solar battery combination will be how the vast majority of energy in the world is produced in the future. That's really, of course, how all of the Starlink satellites are powered, is with solar panels and batteries. So you can just think of Earth like a giant satellite. There's far more power available from the sun than anything else by far. And we think power constraints are going to be, they already are a major issue for AI, just turning on the AI computers. The AI compute demand is so high that people are having, even the hyperscalers are having trouble turning on their AI compute and finding the power and then smoothing the power with the sun.

Smoothing the power with, especially for the training runs, where the power cycles dramatically in a very short period of time, you can have during a training run, the power consumption can drop by 70 percent for 100 milliseconds. And you really need fast acting, advanced power electronics to be able to smooth out these massive changes in power, especially during the training runs.

So that's why SpaceX has bought so many megapacks for the data centers. It's actually mostly for smoothing out the power for the training runs. But it will also be useful for being able to have more power from the grid by, you know, if you tell utilities that they can, you know, that they will not need to supply power during the, you know, the worst hours or the worst days of the year because the batteries can handle it. Then that makes it much easier for them to give you power.

In fact, I mean, probably the best way to scale total energy production in the United States is simply using batteries. Because there's, I think, around 1.2 or 1.3 terawatts of power production in the U. S. , but the average power usage is only half a terawatt. So you've got two and a half times as much power generation as the average usage.

That means you could potentially double the energy out for the United States just with batteries. So really we see demand for Megapack being very, very high in the future.

Thanks everyone. I'm going to turn the call over to management for a while.