Tesla Battery Day

1:06:45Everyone. Well, I mean, this is definitely a new approach. We've got the Tesla drive in movie theater, basically. It's good to see everyone. It's a little hard to read the room with everyone being in cars, but it's the only way we can do it. So hopefully it's cool. And hopefully you can hear me. Can you guys hear me?

1:07:58I think starting from in terms of our ability to create a... In terms of our ability to create a factory, huge kudos to the Tesla Shanghai team for being able to go from literally a dirt pile to volume production in 15 months. It's like, damn. Yeah. And I think something that's really quite noteworthy here is Tesla's the only foreign manufacturer to have a hundred percent owned factory in China. So this is often not well understood or not appreciated, but to have the only hundred percent owned foreign factory in China is a really big deal, and it's paying huge dividends here. So we really wouldn't have the results that we have had this year without the great efforts of the Tesla China team, so I'm super appreciative of that, and we'll see the Shanghai factory continue to scale quite a bit from where it is right now. I think we really could expect that to be, over time, a factory that produces over a million vehicles a year.

1:09:16Yeah, it's cool. So let's see. So we also reached in the past year of volume production of the Model Y, and this was the smoothest launch that we've ever had, so I think we're definitely getting better at a new vehicle launches and building factories and scaling production. As you've heard me say before, the hardest thing is scaling production, especially of a new technology. It's insanely difficult. Making a prototype is relatively easy, and if I think, like, what is the real achievement of Tesla in sort of car company terms, it's like it wasn't making sort of exciting prototypes. It was that Tesla was really the first company in about a century in the U.S., the first U.S.

1:09:16company in the U.S. to reach volume production and be sustainably profitable. The crazy thing is this has really not happened in a hundred years. That's the actual super hard part, and we now have four vehicles in volume production, S3XY. Also, the toughest joke I think maybe ever. It was a very difficult joke to make.

1:10:38So we also introduced the lowest cost solar in the U.S. It's only a dollar 49 a watt, and we really just simplified the whole value chain, so reduced sales and advertising, got rid of a bunch of unnecessary costs, and really are just relying upon the fact that it's just the lowest cost, most efficient solar in the U.S., providing both a retrofit and the solar glass roof, which I think is a really great product. A hard product to make work, but it will be a major pipeline in the future.

1:11:13And we also got four consecutive quarters of gap profitability, which was very difficult. Yeah. And certainly a testament to the hard work of people at Tesla. I mean, to do this in extremely difficult times against a wide range of adverse circumstances was insanely hard, but we got it done, and I think the future is looking I think, very promising from a sort of an annual profitability standpoint.

1:11:13So in order to sort of do well financially, you really need economies of scale, and you need ideally the best technology, and I think we've had the best technology for a while, but now we are also achieving economies of scale, and we're also rapidly improving autonomy, which is a massive value add to each car. So, I think the value of Tesla is going to be like total, just on the vehicle side, total vehicles produced times the value of autonomy. That's a way to think about the future value of Tesla.

1:12:35We also have consistent free cashflow generation. This is really important for growth, and a key element here is tightening up the time from when a car is ordered to when it is built and delivered. So for a company that is growing rapidly, it's extremely important to tighten the supply chain and to have, from when parts arrive, put it into a car very quickly and deliver the car very quickly to the customer. And if you can do that inside soft of your payables timeline, then the faster you grow, the more cash you have. Or conversely, if you're unable to do it within your payables timeline, the faster you grow, the less money you will have, which is obviously bad for capital intensive situation. So just tightening up and having the parts move very quickly to the factory, put it in a car, get it to a customer makes a massive difference to cashflow generation.

1:13:34I mean, that's why it's extremely important to have a factory in each continent, because if you don't at least have a factory in the continent, it isn't impossible to achieve this. So having a factory in China, that's able to serve China, and then soon many other countries in the region will be key to us tightening that total sort of chain of cashflow, and essentially the faster we grow, the more cash. This is really important. That's also why it's important to have Giga Berlin complete, because then we'll have a factory in China, a factory in the U.S. and soon a second factory in the U.S. in Austin, and a factory in Europe.

1:14:18I mean, even if for Giga Texas in Austin, even if we had exactly the same cost as in California, it would still be advantageous to do it there because it's roughly two-thirds of the way across the U.S., so in terms of delivering cars to the central U.S. and to the East Coast, it's just faster, it costs less, and it fundamentally improves our economics. So I think this is also maybe something that's not fully appreciated of just how important it is to have a factory at least on the continent or reasonably close to where the end customers is, so you can tighten that whole chain.

1:14:56Industry performance. While the rest of industry is, has gone down, Tesla has gone up, I think this speaks to... Thanks. And so I'd like to thank all the customers for taking a chance on Tesla and buying our product and really hope you're enjoying it. This is really, our sales, as [inaudible 01:15:21] was saying, it really grew by word of mouth, so this is really, I think it's very pure in the sense that it's growing on the basis of existing owners recommending it to others to new customers. This is, really, I think, a good way to grow.

1:15:40So, and then in 2019 we had 50% growth, and I think we'll do really pretty well in 2020. Probably somewhere between 30-40% growth, despite a lot of very difficult circumstances. I mean, there's so many. Pandemic, the wildfires. It's a whole bunch of difficult production issues, but thanks to the hard work of the Tesla team and a lot of innovative approaches to overcoming issues, we're able to still see significant growth in one of the most difficult. In fact, I'd say probably the most difficult year of Tesla's existence.

1:16:25We also published our extended impact report. At Tesla, we try very hard to do the right thing. If what I think does not happen, it's just because we maybe made a mistake or weren't aware of it, but we always try to do the right thing to the best of our ability, and then we published the extended impact report to show just a self-examination of, okay, what are we doing, right? What are we doing wrong? What can we do better in the future? We're definitely trying to accomplish the most good, and so if we occasionally make a mistake, we work quickly to fix it and do the right thing. So it's worth looking at the average life cycle of emissions in the U.S.

1:16:25and just how much better a Tesla is or electric car than any kind of gasoline car, and what we'll talk about in the Battery Day is also just how much the grids around the world, and actually especially in the U.S., are greening. It's actually much faster than I think people realize, the U.S. is moving towards sustainable energy. And so as we move more and more to sustainable energy, then effectively you end up building the solar factories and the car factories themselves with solar or with sustainable energy. Over time, you will even mine with sustainable energy, and eventually it will get to an effective emissions of zero, so that's where things will end up.

1:18:41Our factories are also becoming safer, and if you look at the sort of accidents per vehicle, total vehicle made it's dramatically better than in the past, and it's already better than industry average, and we're confident we can get it to the best in the auto industry. Autopilot functionality continues to improve, and you can see it in the safety report that we publish every quarter. It's just getting better and better. The U.S. average for collisions is at roughly 2.1 per million miles, and with autopilot engaged, it's 0.3. I mean, this is a profound difference, really massive, and this will get even better.

1:18:41So we're confident that over time we can get the probability of an accident, especially the probability of injury, to 10 times better than the industry average, like an order of magnitude better. So that's just a lot of lives saved and a lot of injuries avoided, so that's a huge priority for us.

1:19:50Yeah, the autopilot front, I think it's hard for people to judge the progress of autopilot. I'm driving... As a matter of course, I've always done this. I drive the bleeding edge alpha build of autopilot, and so I sort of have insight into what is going on. Previously about a couple of years ago, we were kind of stuck in a local maximum, so we're improving, but the improvements kind of started tailing off and just not getting where they needed to be. I call this sort of getting trapped in a local maximum, and so we had to do a fundamental rewrite of the entire autopilot software stack and all of the labeling software as well.

1:20:40So we are now labeling in 3D video, so this is hugely different from the previously where we were labeling essentially a bunch of single images from the eight cameras, and they would be labeled at different times by different people, and some of the labels, you literally can't tell what it is you're labeling. So it basically made it sort of in some cases impossible to label, and the labels had a lot of errors. Now with our new labeling tools, we label it in video, so we actually label entire video segments in the system, so you get basically a surround video thing to label with the surround video and with time. So it's now taking all cameras simultaneously and looking at how the image has changed over time and labeling that, and then the sophistication of the neural nets in the car and the overall logic in the car has improved dramatically.

1:21:44I think we'll hopefully release a private beta of autopilot, of the full self-driving version of autopilot in, I think, a month or so, and then people will really understand just the magnitude of the change. It's profound. So, yeah. Anyway, so you'll see it. It's just like a hell of a step change, but because we had to rewrite everything, labeling software, just the entire code base, it took us quite a while. The sort of new... I call it like 4D in the sense that it's three dimensions plus time. It's just taken us a while to rewrite everything, and so you'll see what it's like. It's amazing. Yeah. It's just clearly going to work.

1:22:42At Tesla, the core competencies, we've got engineering, obviously, but also manufacturing. I think manufacturing is underappreciated in general, and the difficulty of designing the machine that makes the machine is vastly harder than the machine itself. So the designing, like making a Model 3 or Model Y or Cybertruck truck prototype is really quite trivial compared to designing the factory that makes it, especially if it's new technology, and you want to use new manufacturing methods. It's just at least 10 to 100 times harder to do the factory than the prototype, and that's why you see a lot of companies out there or startups they'll bring out a prototype, but they just can't get it over the hump for who manufacturing, because manufacturing of new technology especially is the hardest thing by fa. Basically, the prototype is at best 10% of the difficulty and probably closer to 1%.

1:23:50And then software. Tesla is both a hardware and a software company, so a huge percentage of our engineers are actually software engineers, and you can think of our car as kind of like a laptop on wheels, so software is incredibly important. Actually, not just in the car, but also in the factory. So the factory software is extremely important. Just software in general. I mean, these are fundamental. These are the three critical areas that are needed to make for an awesome company. So, yeah.

1:24:29So we have... Now we'll soon have three new factories incremental on... Well, we have one already. On three different continents. Shanghai, we're expanding the Shanghai with the second phase. Berlin is making rapid progress, and Texas is making even faster progress. So, yeah. With each factory, what we're trying to do is also improve the manufacturing technology, so in some cases like the Model Y made in Berlin might look the same, but it actually is made in a much more efficient way. Yeah, we'll talk about that later in the battery presentation.

1:25:15Yeah, we launched Megapack. It's three megawatt hours all in one energy storage solution, so it's been great overall. Yeah. All right. And I think that's basically it, right? All right, thank you. All right. Well, thanks, everyone, for coming, and we'll be back in a little bit to go through the battery stuff, and there's a little bit more. In addition to the battery stuff, we've got a few extras as well. So I think you'll really like what we have to say on batteries.

1:25:53The battery stuff we're going to talk about is truly revolutionary and essential to Tesla's goal. The fundamental good of Tesla, it's like, if you look back in history and say, "What good did Tesla do?" The good will by how many years did we accelerate sustainable energy? That's the true metric of success. It matters if sustainable energy happens faster or slower, and so that's really how I think about Tesla and how we should assess our progress. By how many years did we accelerate sustainable energy? And what we're going to talk about with batteries and a few other things will really explain how we're going to make a step change improvement in the acceleration of sustainable energy.

1:25:53Thank you. [inaudible 00:18:44]. Speaker 1: Hi, folks. That was great. We're going to take a short break before we begin the Battery Day event, so stay tuned. If you're local and here in the audience today, you can feel free to get out of the cars and stretch your legs, but try to stay near the cars, because we're going to begin properly in a little bit. See you soon. (silence).

1:27:06[inaudible 01:40:28]. Great. Should you start? Great. So let's see. You've got the clicker? Okay. Let's... Yeah. I'll take it at first, perhaps.

1:41:23So the past five years were the hottest on record. We have what looks like a wall for CO2 PPM. It's obviously... This time is not like the past. It's really important that we take action. Running this climate experiment is insane, so...

1:42:03There is a lot of good news though. A lot of people may not be aware that that wind and solar comprise 75% of new electricity capacity in the US this year. So this is really major. So the grid is going sustainable very quickly. Now, it's also worth noting that the length of time that power plants lasts is on the order of 25 years. So even if a hundred percent of energy generation was sustainable, it will still take 25 years to convert the grid. And it's also worth noting that in the past 10 years, power production from coal has dropped in half. So it went from 46% of electricity in 2010 to 23% in 2020. So this is a massive improvement. So good things are happening on a lot of levels.

1:44:38Yeah, you basically need on the order of roughly 10 terawatt hours a year of battery production to transition the global fleet of vehicles to electric.

1:45:00Yeah. So it's a lot of batteries, basically. Yeah. And this number I think might grow even more. As the world economy matures, and as countries with high populations industrialize, we could see this number be even more. But let's say it's like roughly 20 to 25 terawatt hours per year sustained for 15 to 25 years to transition the world to renewable.

1:46:32Yeah, and I think we should view this as more than just a question of money. Money is sort of an ethereal thing, but it's really the amount of effort. You have a certain amount of effort in terms of people and machines, and depending on how efficient that effort is, for a given amount of effort, you want the most amount of batteries. So it's not just the question of well, if we have $2 trillion, tomorrow you could make this. It's not that easy. You actually need to organize a massive number of people, build a lot of machines, build the machines that make the machines. And so it's incredibly important to have that effort yield the most number of batteries.

1:47:16So, and then goal two, obviously we need to make more affordable cars. I think one of the things that troubles me the most is that we don't yet have a truly affordable car, and that is something that we will make in the future. But in order to do that, we've got to get the cost of batteries down. We've got to make, and we've got to be better at manufacturing. And we need to do something about this curve. The curve of the cost per kilowatt hour of batteries is not improving fast enough. So we've given this a lot of thought over many years to say, okay, how can we radically improve the cost per kilowatt hour curve? It's been somewhat flattening out actually in recent years.

1:48:10Yeah, exactly. So yeah. And EV market share is growing, but EVs still aren't accessible to all. And you can see, as you Drew were saying, it's like starting to flatten out a little bit because the rate of improvement of the affordability of cars is just not fast enough. So that's why we've got Battery Day.

1:48:45Yeah. It's weird, the slides don't show up quite right here. What shows up on the screen is not quite what shows up there.

1:49:45Yeah. I mean, we basically thought through every element of the battery, or almost every element. There are a few more elements that we won't get to today, but we will get to in the future.

1:51:20Actually, slight note on why is the one called 18650, although not on the slide, versus the 2170, is that the first two digits refer to the diameter, and the second two digits refer to the length. So that helps explain what's up with these weird numbers. But nobody could explain to me why there was an extra zero. So I, so I said, "Okay, well, we're deleting the zero that nobody can explain in future form factors." So that's why it's technically, it's like the 18650 bizarrely, but going forward it's the 2170, because we just got rid of the extra zero because it's pointless.

1:52:37Any fool, any fool could make a bigger form factor. Are we not any fool?

1:53:46Yeah. This is important to appreciate. Basically the distance that that electron has to travel, it's just much less. So you actually have a shorter path length in a large tabless cell than you have in the smaller cell with tabs. This is a big deal. So even though the cell is bigger, it actually has more power. The power to weight ratio is actually better than the smaller cell with tabs. This is, again, this is quite hard to do it. Nobody's done it before and it really took a tremendous amount of effort within Tesla engineering to figure out how do we make a frigging tabless cell and have it actually work and then connect that to the top cap. There's a whole bunch of things that we're keeping a little secret sauce here that we're not telling everything, but- Drew Baglino: Sometimes what's elegant and simple is still hard. And it took us a lot of trials, but we're happy where we ended up.

1:54:46Yeah. I mean, everything is simple in recollection, after you... it's hard until it's discovered and then it's simple. So anyway, there's a lot of really cool things going on that enable tabless. And it was really due to a really great engineering team. Drew and the rest of the team had done amazing work in achieving this tabless construction. I think it may sort of sound a bit silly to some people, but for people that really know cells, this is a massive breakthrough.

1:55:28Yeah. Just to elaborate on that a bit, it's like when the cell is going through the system, it has to keep stopping where all the tabs are. So you can't do a continuous motion production if you have tabs. You have to keep stopping and then there's a rate at which you can start and stop and accelerate again and it really slows down the rate of production. And then sometimes you get the tabs wrong and you also lose a little bit of active area. It's really a huge pain in the ass to have tabs from a production standpoint.

1:56:23Yeah. So these... Yeah. It's pretty great. And just to clarify, when we see these plus 16% or whatever the percentage rate increase is, these are the amounts due just to that particular innovation. So we'll list a whole bunch of innovations and then when you add them up, you get a total improvement in energy density and cost. But these numbers are what refer to just this thing.

1:57:08Yeah. So. Yeah. It's a video of some of what's going on in the plant. Now. I mean, to be clear, it will take about a year to reach the 10 gigawatt hour capacity. So this is important to appreciate. When you build a factory, there's a certain capacity that you design to, and then it takes some period of time to actually achieve that capacity. So I would say it's probably about a year before we get to the 10 gigawatt hour annualized rate with the pilot plant. And this is just a pilot plant. The actual production plants will be more on the order of maybe 200 gigawatt hours, maybe more over time.

2:01:25I mean, it's hard actually, just to be clear. If this was easy, everyone would do it. It's not like dry coating electrode is actually easy. It's actually very hard to do what appears to be a simple thing. And it's worth noting, we did acquire Maxwell a little over a year ago, I guess, and certainly a good company and everything, but the dry coating they had was like, it's like sort of, I would call proof of concept. Since the acquisition. We've actually ramped the machine that does dry coating four times. So revision full post acquisition of the machine, and there's still a lot of work to do. So I would not say this is completely in the bag. It's still a lot of work to do.

2:01:25And as you grow, as you scale, go from benchtop to lab to pilot to volume production, there are actually major issues that you encounter at every level. It's not like you make something work on your bench and bingo, now you can make a bazillion of it.

2:02:48Yeah. I mean, to be clear, I would like to not say that right now, it just totally working. It's close to working, but it's not, even now at the pilot plant level, it is close to working. It's fair to say probably it does work, but with not a good, not a high yield.

2:03:29There's a clear path to success, but a ton of work between here and there. But this is a really profound improvement. Again, for people that know battery manufacturing, this is gigantic. We'll probably be on machine revision six or seven by the time we do large scale production. The rate at which the machines are being improved is extremely rapid. Literally every three or four months, there's a new rev.

2:04:24Exactly, no stop lights and traffic lights sort of thing. Yeah. So you can sort of think about the sort of the fundamental physics of a factory or something. I think it's actually quite a lot like the rocket equation where you've got basically the rocket equation you've got your exhaust velocity and then the log of [end 02:05:24] masses. So it's basically saying how fast are things going and what percentage of the factory volume is doing useful work? And conveyance does not count as useful work.

2:07:03Yeah. I mean, basically Tesla is aiming to be the best at manufacturing of any company on Earth. This is the thing that's actually most important in the long run I think, just from a company standpoint and from basically achieving sustainability as fast as possible. But I think also for long-term competitiveness, eventually every car company will have long range electric cars. Eventually every company will have autonomy, I think, but not every company will be a great at manufacturing. Tesla will be absolutely head and shoulders above anyone else in manufacturing, that is our goal.

2:08:43Sure. So essentially what this translates to based on what we know today is about a 75% reduction in the investment per kilowatt hour. Or gigawatt hour. It's just basically four times better than the current state of the art to the best of our knowledge. And I think there's probably room to improve even beyond that.

2:10:02Yeah. So this is just talking about Tesla internal cell production. As I tweeted out earlier, we will continue to use our cell suppliers, Panasonic and LG and CATL. And so this is a hundred gigawatt hours supplemental to what we buy from suppliers. And yeah, essentially, this does reduce our weighted average cost of a sale, but it allows us to make a lot more cars and a lot more stationary storage. And then long-term, we're expecting to make on the order of a 3000 gigawatt hours or three terawatt hours per year. I think we've got a good chance of achieving this actually before 2030, but I'm highly confident that we could do it by 2030.

2:11:18But wait, there's more. Yeah. Basically with silicon, the cookie crumbles and gets gooey. That's basically what happens.

2:13:14Yeah. And I'm not sure if you saw this. Basically a dollar per kilowatt hours basically. If you use simple silicon, it's dramatically less than even the silicon that is currently used in the batteries that are made today, and you can use a lot more of it.

2:16:41Yeah. Sure. So in order to scale, we really need to make sure that we're not constrained by total nickel availability. I actually spoke with the CEOs of the biggest mining companies in the world and said, "Please make more nickel, this is very important." And so I think they are going to make more nickel. I think we need to have a kind of a three-tiered approach to batteries.

2:17:07So starting with iron, that's kind of like a medium range, and then nickel manganese as sort of a medium plus intermediate and then high nickel for long range applications like Cyber Truck and the semi. Something like a semi-truck, it's extremely important to have high energy density in order to get long range. And just to give sort of iron up a bit more time, if you look at [inaudible 02:17:37] per kilogram at the cathode level of iron, it looks like nickel's twice as good, but when you fully consider it at the pack level, everything else taken into account, nickel is about maybe 50 or 60% better than iron.

2:17:52So iron is a little better than it would seem, when you look at it at the pack level fully considered. It's not as good as nickel, nickel's like 50 to 60% better, but it's actually pretty good. Good for stationary storage and for medium range applications where energy density is not paramount. And then, like I said, for intermediate, it's kind of a nickel manganese, and it's a relatively straightforward to do a cathode that's two-thirds nickel one third manganese, which would then allow us to make 50% more cell volume with the same amount of nickel.

2:19:34It's insanely complicated. It's a small world journey of, "I am a nickel atom, what happens to me?" And it is crazy. You're going around the world three times, there's the moral equivalent of digging the ditch, filling the ditch and digging the ditch again, it's total madness basically. And these things just grew up, they're just kind of like legacy things, it's like how it was done before and then they connected the dots but really didn't think of the whole thing from a first principle standpoint saying, "How do we get from the nickel ore in the ground to the finished nickel product for a battery?" So we've looked at the entire value chain and said, "How can we make this as simple as possible?"

2:21:45Yeah. To be clear, cathode production would be part of our the Tesla cell production plant. So it would just be basically raw materials coming from the mine and from raw materials in the mine out comes a battery.

2:22:25So it's important to note that there is a massive amount of lithium on earth. So lithium is not like oil. There's a massive amount of it, pretty much everywhere. In fact is there's enough lithium in the United States to convert the entire United States fleet to electric, all the cars in the United States. Like 300 million or something like that. Every vehicle in the United States can be converted to electric using only lithium that is available in the United States.

2:22:59Yeah, people haven't been trying because it's just widely available. But it is important to say, "Okay, what is the smartest way to take ores and extract the lithium and do so in an environmentally friendly way?" And we actually discovered... Again, looking at it a first principles physics standpoint, instead of just the way it's always been done, is we found that we can actually use table salt, sodium chloride, to basically extract the lithium from the ores. Nobody's done this before, to the best of my knowledge, nobody's done this. And all the elements are reusable, it's a very sustainable way of obtaining lithium. And we actually got rights to a lithium clay deposit in Nevada.

2:23:52Over 10,000 acres. And then the nature of the mining is actually also very environmentally sensitive in that we sort of take a chunk of dirt out of the ground, remove the lithium, and then put the chunk of dirt back where it was. So it will look pretty much the same as before, it will not look like terrible. And yeah, it'll be nice.

2:24:27Yeah, that's true. Actually, just what's in Nevada. Basically, there's so much damn lithium on Earth it's crazy. It's one of the most common elements on the planet.

2:25:30To date, it's been done by third parties, but we think we can recycle the batteries more effectively, especially since our batteries, we're making the same battery as the thing we're recycling. Whereas third party recyclers have to consider batteries of all kinds.

2:26:04Yeah. Long-term, new batteries will come from old batteries once the fleet reaches steady state.

2:26:31So there's an architecture that we've been wanting to do at Tesla for a long time, and we've finally figured it out. And I think it's the way that all electric cars in the future will ultimately be made, it's the right way to do things.

2:26:52So it starts with having a single piece casting for the front body and the rear body. And in order to do this, we commissioned the largest casting machine that has ever been made. And it's currently working just over the road at our Fremont plant. It's pretty sweet. Currently making the entire rear section of the car as a single piece, high pressure die-cast aluminum. And in order to do this, we actually had to develop our own alloy because we wanted a high strength casting alloy that did not require coatings or heat treatment. This is a big deal for castings. Especially with a large casting. If you heat treat it afterwards it tends to deform, it kind of does this like potato chip thing. So it's very hard to keep a large casting to have its shape.

2:27:47So in order to achieve this, there was no alloy that existed that could do this, so we developed our own alloy, a special allow of aluminum, that has high strength without heat treat and is very castable. So that's a great achievement of our materials team. In fact, in general, we've got a lot of advanced materials coming for Tesla, new alloys and materials that have never existed before.

2:28:10So, you're basically making the front and rear of the car is a single piece and that then interfaces to what we call it, the structural battery. Where the battery for the first time will have dual use. The battery will both have the use as an energy device and as structure. This is absolutely the way things are done. In the early days of aircraft they would carry the fuel tanks as cargo. So the fuel tanks actually were quite difficult to carry. They're basically worse than cargo, you had to add to kind of bolt them down. It was very difficult. And then somebody said, "Hey, what if we just make the fuel tank in wing shape?" So all modern airplanes, your wing is just a fuel tank in wing shape. This is absolutely the way to do it. And then the fuel tanks serves this dual structure, and it's no longer cargo. It's fundamental to the structure of the aircraft. This was a major breakthrough.

2:30:10What we do essentially, instead of having just a filler that is a flame retardant, which is currently what is in the 3NY battery packs, we have a filler that is a structural adhesive, as well as flame-retardant. So it effectively glues the cells to the top and bottom sheet. And this allows you to do shear transfer between upper and lower sheet. Just like if you have a formula one craft or a racing boat, and you have carbon fiber face sheets and aluminum honeycomb between them, this gives you incredible stiffness and it's really the way that any super fast thing works is you create basically a honeycomb sandwich with two face sheets.

2:30:58This is actually even better than what aircraft do. Because aircraft do not do this. They can't do this because fuel is liquid. So in our case the batteries are solid. So we can actually use the steel shell case of the battery to transfer shear from the upper and lower face sheet, which makes for an incredibly stiff structure, even stiffer than a regular car. In fact, if this was a convertible that had no upper structure, that convertible will be stiffer than a regular car.

2:32:36It also proves what's called the polar moment of inertia. Which is if you think of when there's a ice skater arms out or arms in. Arms in, you rotate faster. So if you can bring things closer to the center, you reduce the polar moment of inertia and that means the car maneuvers better. It just feels better. You won't know why, but it just feels more agile. So it's really cool.

2:33:45Yeah. So major improvements on all fronts from the cell all the way to the vehicle.

2:34:47Yeah. So I think it's pretty nice that investment per gigawatt hour reduction is 69%. I mean, who would have thought?

2:35:03I mean, 0.420%, of course. So what this enables us to do is achieve a new trajectory in the reduction of cell cost. And now to be clear, it will take us probably a year to 18 months to start realizing these advantages and to fully realize the advantages probably it's about three years or thereabouts. So if we could do this instantly we would, but it just really bodes well for the future and means that the long-term scaling of Tesla and the sustainable energy products that we make will be massively increased. So, what tends to happen as companies get bigger is things tend to slow down, actually they're going to speed up.

2:36:04Yeah. Long-term we want to try to replace at least 1% of the total vehicle fleet on Earth, which is about 2 billion vehicles. So long-term, we want to try and make about 20 million vehicles a year.

2:38:02Yeah. So we have and extreme performance and range. And we should probably talk about, more or less, Plaid. What about that? So, yeah. Anyway, we took the latest Plaid out to Laguna Seco on Sunday, it got a minute 30, and we think probably there's another three seconds or more to take off that time. So we're confident the Model Plaid will achieve the best track time of any production vehicle ever, of any kind, two-door or otherwise.

2:39:15And you can order it now. And it's available basically in the next year. And now we'll move to Q&A.

2:39:54Actually, I don't know either. You can maybe get out of the car for two seconds and yell it at us. How are we getting the questions? Speaker 2: [inaudible 02:40:08].

2:40:45Yes, we will be manufacturing cells in Berlin. And they could also stack them. So if you want to say, depending upon the size of your house or whatever, how much you need, you can just basically stack them and just have a very compelling, super efficient home HVAC. And then you could also communicate with the car and it'll know when you're coming home. So it's like, "Oh, I don't need to keep the house cold all day, I'll just cool it down because I knew you were coming home." So the pack can communicate with the car and just really dial it into when you actually need cooling and heating.

2:42:51We'll try to do that. Yeah. I agree, that would be really cool.

2:43:12Well, I don't think there will be at ICE industry longterm. Well, I guess there might be like a few things that it's a like curious thing. There's still like some steam engines made somewhere, but they're just basically sort of quirky collector's items. I mean, that will be the future of the internal combustion engine car.

2:44:09Well, it's hard to say what the volume exactly would be for the cyber truck. The orders are gigantic. We have like, I don't know, well over half a million orders, I think maybe six or 600,000. It's a lot, basically, we stopped counting. So I think there's probably room for, I don't know, at least like a unit volume of like 250 to 300,000 a year, maybe more. Now, we are designing the cyber truck to meet the American spec. Because if you try to design a car to meet the super set of all global requirements you can't make the cyber truck, it's impossible. So it really is designed for the American market, but this is the biggest market. Our North American market is the biggest market for pickup trucks by far or large pickup trucks.

2:44:59And then I think we'll probably make an international version of cyber truck that'll be kind of smaller, kind of like a tight Wolverine package. It'll still be cooler, but it'll be smaller because you just can't make a giant truck like that for most markets. So, yeah, but it's going to be great.

2:45:17And I don't know. I think probably we'll be able to sell directly in Texas. We do pretty well right now, but it is a bit weird not being able to actually conclude a transaction in Texas, but it's got to be like a click on a server based in California. But weirdly we can do leasing in Texas, but not selling. Hopefully that'll get cleared up in the future. Speaker 6: Elon, great job with everything that you're doing. It's Ross Gerber from Gerber Kawasaki. Your team's amazing. What I'm most curious about, these innovations are incredible but on my drive up here fully on autopilot for 400 miles, the entire state is brown and this is ultimately about climate. Has there been some analysis done if all these things are achieved, what will its direct impact be on climate?

2:46:10I think it will have a very significant impact because it will stop the CO2 PPM from growing as it is every year. I should say, I try to view the whole climate thing as a science question as much as possible. Science, you always question your hypothesis, is it true? Is not true? Or assign a probability to a given hypothesis. And I should say that my original interest in electric vehicles predates the climate issue. When I was in high school, I thought, "Man, if we don't figure out electric cars, the whole economy's going to collapse when we run out of oil." So we better figure out electric cars and sustainable energy or civilization's going to crumble.

2:46:57And then it was only later that the significance of the climate risk became apparent. And we were also able, using tracking and other types of technology to access a lot more fossil fuels than previously thought, which is helpful for lowering the cost of gasoline, but it's pretty bad for the total tonnage of CO2 that you could put in the atmosphere. It's now greatly beyond what people previously thought. As we were just going through this presentation, it is a absolutely monumental task to accelerate the advent of sustainable energy. The entire global economy is still more than 99% dependent on, or call it roughly 99% dependent on, fossil fuels.

2:46:57So although electric cars get a lot of press right now, as a percentage of the total global fleet it's practically nothing. I would say yes, less than 1% of the global fleet is electric right now. Because of two billion cars and trucks and whatnot in use. So there's a massive amount of work ahead.

2:46:57Just insane, like hard to comprehend how much work is ahead to get the new vehicle production to be sustainable, to massively increase the amount of stationary storage, which is critical because renewable energy is intermittent, wind, and solar is intermittent, sometimes the wind doesn't blow and this obviously sun doesn't shine at night, so you got to have batteries, a massive, massive number of batteries.

2:49:21That's true. It is a false dichotomy to say that it's either prosperity or sustainability. This is often used by oil and gas to say like, "Oh, well, do you want people to lose their jobs? Do you want to lower people's standards of living? Do you want to make all these economic sacrifices really in order to have sustainability?" And the reality, as Drew was saying, is that sustainable energy is going to be lower cost, not higher cost than fossil fuels. Speaker 7: Elon, quick question for you, right here in front. First, thanks for having everyone. I was telling a friend, the one company to go work for that's going to have the biggest structural...

2:49:21Speaker 8: And the one company to go work for, that's going to have the biggest structural impact over the next 10 years at scale, it's probably Tesla. So kudos to everyone at Tesla for what they've done to this point and going forward. The two questions for you, as you've looked at the auto in the storage markets, I know you've talked about it at kind of 50/50 longterm, but it seems like a lot of the battery cost curve achievements that you presented today, really make some of these storage opportunities much more feasible over the next five years.

2:49:21And so I guess the first part of the question is, does your calculus upon learning and improving these things, change on that 50/50 mix, or is there a role where storage becomes bigger? And then the second part of the question, with all these huge grand visions, who's going to be with Tesla from a corporate perspective, accomplishing these things? Obviously, Tesla can't do it alone, but when you look at some of the traditional auto industry or power, et cetera, I don't see a lot of other Tesla's.

2:50:59Well actually, there's a lot of companies in China that I think are doing great work with electric vehicles and also with stationary storage, although we don't see that much in the US yet, but I think probably we will in the future. I don't know, obviously we're doing everything we can to encourage other companies to move to sustainable transport and also make stationary storage batteries. We made our patents freely available, we really try to tell these companies, "Hey, you really need to do this, or you won't exist in the future," but they don't believe it. So we've talked until we're blue in the face. What are we supposed to do? But we really are hopeful that other companies will also do what we're doing and that will make a sustainable future come sooner.

2:53:12Well, I mean, there are batteries in limited production right now, that do exceed 400 watt hours per kilogram, which I think is about the number you need for a decent range, medium range aircraft. And I think our batteries will, over time, start to approach the 400 watt hours per kilogram range as well. So yeah, I mean, I think over time, we'll see all modes of transport, with the ironic exception of rockets, transition to sustainability or to electric basically. On the rocket front, what we're planning to do is, about 80% of Starship is liquid oxygen and we're actually already running a power line to be able to use wind power to create the liquid oxygen.

2:53:12So we're making some decent progress on sustainability on the rocket front, but there's just no way to have an electric rocket. And it's important for the future of life and consciousness, that we become a multi planet species, so got to keep doing that.

2:56:15I think just making really efficient cars that have lower drag coefficient, low rolling resistance, efficient powertrains, I mean, that's kind of what we've done in order to make iron phosphate still have a good range. So the iron phosphate's a lower energy density solution, but while there are some limitations on the total amount of nickel produced every year, there's really no limit on the iron. There's so much iron it's ridiculous. So you can really scale up iron phosphate at a raw materials basis, more than you can nickel.

2:58:27Yeah. In fact, if there's anything that you guys want to comment on, feel free to step forward and say something. Speaker 10: I think the key is to be smart about your chemistry choices, your materials choices. Talk louder. Speaker 10: Yeah. If you're smart about your materials choices, the spice will continue to flow. You don't need to use the same kind everywhere. It's about strategically planning it out and for miners, I think we are incentivizing them quite a bit, to ramp up their production.

2:59:44We haven't really thought about it that much, but I suppose it's probably something we should think about. We will be providing a title on the Tesla's. So we're providing more music sources that people can choose from and just generally trying to improve the entertainment experience in the cars. And I think actually as we go to a more autonomous future, the importance of entertainment and productivity will become greater and greater.

2:59:44I mean, to the degree that if you're just basically sitting in your car, the car is fully autonomous and driving somewhere, the car is essentially your chauffeur and then the things that become important are, okay, well let's have good entertainment and if you want to do some productivity stuff, then that actually starts to become much more important because you're no longer spending your attention driving the car. So it will be extremely important in the future.

3:00:54Yeah. The first one, I think we already answered. If we're able to make enough cells, which we'll try to do, we will supply other companies. It's definitely not an intentional effort to keep the cells to ourselves, if we can make enough for other companies, we will supply them. And we were trying to do the right thing for advancing the sustainable energy, whatever that is.

3:01:19Vehicle to grid, we get asked that a lot. I think one of the things that's important to note, is vehicle to grid, unless you have a power cutoff, you need to cut off your main supply to the grid, otherwise, if you lose the power in your house, you'll basically just backflow energy to the grid. So just having a reversal in the power flow, does not actually keep the lights on, you need a whole separate system to cut off power to the grid. And I think there's also the case that people really want the freedom to be able to drive and to charge at their house. And it's obviously very problematic if you get to morning and your car, instead of being charged, it discharged into the house and then you're sort of, "Okay, now I can either drive or use the battery to power my house."

3:02:19I think it's actually going to be better for people's freedom of action, to have a power wall and a car separate, and then everything works that. You basically combine that with solar, either solar retrofit or solar glass roof, and local battery storage, so you basically become your own utility and then the car can be charged also with solar. I think that's the stuff that works, that said, we can certainly do vehicle to grid, I think we can basically enable that with software in Europe or something, right?

3:03:49Yeah. Honestly, a vehicle to grid sounds good, but I think actually has a much lower utility than people think. I think very few people would actually use vehicle to grid. With the original roadster, we had vehicle to grid capabilities, nobody used it.

3:04:18How do we find the engineers to do all these things? Well, I guess we recruit a lot of engineers from all parts of the world. I think Tesla has a good reputation for doing exciting engineering and that tends to attract a lot of the top engineers in the world because they know that their efforts at Tesla will really serve the greater good and we're super hardcore about engineering. Tesla is first and foremost an engineering company, it's like hardcore engineering is what we do. The sheer amount of hardcore engineering done at Tesla is insane. And if you look at say, there's various surveys done of engineering schools, where do you want to go, what's your top choices? And actually the top two choices last few years, have been Tesla and SpaceX. So sometimes it's Tesla first and sometimes SpaceX first, but those are the two top ones.

3:05:30Absolutely. And like you said, the battle is far from over. Less than 1% of the global automotive fleet has been converted to electric and even maybe less than 0.1% of stationary storage has been done. So stationary storage has barely begun, converting the global vehicle fleet to electric, has barely begun. So there's still a massive amount of engineering work to be done at Tesla and other companies, to accelerate this transition to sustainability.

3:06:39Yeah. I mean, I think certainly we will try to give back as much as possible to the customers. It's not like Tesla's profitability is crazy high, our average profitability for last four quarters, is maybe 1%. So just to be clear, it's not like we're minting money. Our evaluation makes it seem like we are, but we're not. So we do want to try to make the price as competitive as we can, without losing money. If you keep losing money, you'll just die. So this thing called profit is just like, we need to bring in more money than we spend, otherwise we're dead.

3:07:25Yeah. I mean, it's important to sort of separate the difference between affordability and value for money or desirability of the product. So for a lot of people, they want to buy a Tesla, they simply don't have enough money. We could make the car infinitely desirable, but if somebody does not have enough money, they can't buy it. Sometimes people kind of forget this. People have to have enough money to buy the car and just making a car super desirable, but expensive, does not mean they can afford it. So it's absolutely critical that we make cars that people can actually afford. Go through some of these things, scroll down or something.

3:08:30Yeah. We're already pretty close. And then factoring in total cost of ownership and the fact that electric vehicles require much less servicing and are way cheaper to run, when you look at total cost of ownership. And you can always lease a car, so if you just lease a car or get a loan for a car, you've got your sort of monthly payments and then your cost for either gasoline or electricity and your cost of servicing and the fully considered cost of electric car is much less than a gasoline car of the same nominal purchase price. I mean, that said, maybe on the order of three years, when we can do lower cost, like a $25,000 car, I think that will be basically on par, maybe slightly better than a comparable gasoline car. So I think maybe it's on the order of three years-ish.

3:10:09Yeah, a lot of the things we've already asked really. Guys, is there anything you want to add to... Maybe we can go through everyone and maybe say what you're doing and say a few words. I don't know. Speaker 10: Sure. I just want to reiterate the fact that this is a massive problem.

3:11:25Massive problem. Speaker 10: And it seems like Tesla's on its way and ahead, but we need everybody's help because it's everybody's planet and we're not going to get to 20 terawatt hours by ourselves. So please think about this carefully, as it affects everybody, so let's get on it.

3:11:45Yeah. And obviously, if you care about solving sustainability and doing hardcore engineering, definitely come work for Tesla. Speaker 12: Yeah. We went through a couple of the manufacturing improvements and it kind of looks easy when you put together a nice slide deck, but it's super challenging. When you take materials out of the process, when you integrate processes together, you have to do a lot of things at once and that's like this immense engineering challenge. And so to appreciate that, to get through this, we need the best engineers we've got. And we've got this awesome team, I just want to shout out also to all of our team watching, you guys are awesome, you absolutely kicked ass putting this together.

3:17:23All right. Well, I guess thank you everyone for coming. I hope you liked the presentation. Very exciting future ahead. We're going to work our damnedest to transition the world to sustainable energy as quickly as possible, and your support and help is key to that success. So thanks again, super appreciated and look forward to the next event.