Note: This is a preliminary transcript and may contain inaccuracies. It will be updated with a final, fully-reviewed version soon.
Tesla Inc (NASDAQ: TSLA) Q1 2026 Earnings Call dated Apr. 22, 2026
Corporate Participants:
Travis Axelrod — Investor Relations
Elon Musk — Chief Executive Officer
Vibhav Tineja — Chief Financial Officer
Analysts:
Unidentified Participant
Mark — Analyst
Unidentified Participant
Will Stein — Analyst
Pierre — Analyst
Dan — Analyst
Unidentified Participant
Colin — Analyst
Presentation:
Travis Axelrod — Investor Relations
It’s. Good afternoon everyone and welcome to Tesla’s first quarter 2026 Q&A webcast. My name is Travis Axelrod, head of Investor Relations and I’m joined today by Elon Musk, Vibhav Tineja and a number of other executives. Our Q1 results were announced at about 3pm Central Time in the update deck we published at the same link as this webcast. During this call we will discuss our business outlook and make forward looking statements. These comments are based on our predictions and expectations as of today.
Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the sec. During the question and answer portion of today’s call, please limit yourself to one question and one follow up. Please use the raise hand button to join the question queue. Before we jump into Q and A, Elon has some opening remarks. Elon,
Elon Musk — Chief Executive Officer
Thank you. So I think we’ve got a very exciting year ahead of us with 2026. We’re going to be substantially increasing our investments in the future, so should expect to see significant, a very significant increase in capital expenditures, but I think well justified for a substantially increased future revenue stream. And obviously Tesla’s not alone in this. I think you’ve seen most, if not all, certainly the major technology companies substantially increasing their capital investments and we’re going to be doing the same.
I think it’s going to pay off in a very big way. So we’re investing in and improving our core technologies, battery, powertrain, AI software, AI training, chip design, manufacturing expanded, laying the groundwork for significantly increased manufacturing production. We are also strengthening our supply chain across the board, batteries, energy, silicon everything and laying the groundwork, like I said, for what we expect to be a significant increase in vehicle production in the future. And of course a very significant increase.
Well actually releasing Optimus but increasing our tunnel production for testing and then probably being able to have Optimus be useful outside of Tesla sometime next year. As you’ve heard me say a few times, I think Optimus will be our biggest product. Not just Tesla’s biggest product ever, but probably the biggest product ever. And I remain convinced of that conclusion. So on our vehicle side, it’s always, I think worth noting that a Tesla car is incredibly incredible value for money and they’re all autonomy ready depending on what part of the world you’re in.
The supervised full self driving is getting extremely good. We have just started production of Cybercab and will begin production of our semi truck soon. Now I should say Whenever you have a new product with a completely new supply chain, new everything, it’s always a stretched out S curve. So you should expect that initial production of Cybercap and Semi will be very slow, but then ramping up and going kind of exponential towards the end of the year and certainly next year. And in fact we’ll be ramping up production of all vehicles and all factories to the best of our ability through the balance of this year.
On the energy front, the United States and the whole world will need a lot of energy storage to meet growing electricity demand. Demand for our Megapack is very strong and we’re excited to begin production of Megapack 3 later this year in our new world class factory outside Houston for full self driving. And robotaxi version 14.3 was a major architectural update and we have a whole pipeline of major improvements to full self driving that we believe will lead to unsupervised full self driving being available anywhere in the world that it is legal to do so.
And then, and then there’s a version 15, hopefully later this, hopefully by the end of this year, but certainly by early next year. And that will be a complete overhaul of the software architecture and we’ll run on AI4. And at that point we’re really just increasing the safety level of FSD above human safety level even more meaning, I think even within version 14 we’re significantly safer than human. But B15 will take that to another level. We’ve expanded Rover taxi to Dallas and Houston using the same software source in the Bay Area.
And the limiting factor for expansion is really rigorous validation, making sure things are completely safe. We don’t want to have a single accident or injury with the expansion of Robotaxi. And we have to the credit of the team, not had a single one to date. And Optimus, we’re preparing Fremont for startup production later this year with Optimus. Again, totally new supply chain, totally new technology. So therefore the production S curve is always very slow in the beginning, but will ramp up to significant numbers next year.
And we’re constructing a second Optimus factory at our Giga Texas location and that will probably start production around summer next year. The V3 Optimus design is almost ready to demonstrate. I think we want to just make sure it’s like polished, like it works functionally, but there’s some aesthetic elements that need to be finalized and I think probably middle of this year we should be able to show it off. We’re also a little hesitant to show V3 off because we find our competitors do a frame by Frame analysis whenever we release something and copy everything they possibly can.
So I think there’s some value to not showing new technology until it’s close to production. The congratulations to again to the Tesla AI chip team for taping out AI5. That’s going to be a great chip. I think probably the best AI inference chip for Edge compute that exists and certainly I think unequivocally the best value for money team did a great job and we already have a lot of momentum for designing AI6 and we’ve begun to discuss ideas for Dojo 3. So this is all very exciting. We’ve also. Finalized plans for the chip fab, the research chip Fab on the Giga Texas campus and we’ll start construction of that this year.
In conclusion, Tesla is working on a lot of large ambitious projects. They’re all very, very challenging, but I think they’re going to be revolutionary. And this is what the team does best, solve the hardest problems and build amazing products. And I’d like to thank the Tesla team for all the hard work and thank you to all of our supporters.
Travis Axelrod — Investor Relations
Great, thank you very much Elon and Vaibhav also has some opening remarks.
Vibhav Tineja — Chief Financial Officer
Thanks Travis. So 2026 has had an interesting start, not just for us, but I think the world in general. On the autos business we have seen a resurgence in demand in EMEA and certain countries like France and Germany showing over 150% growth, quarter over quarter growth in deliveries. In APAC we witnessed growth in South Korea and Japan again in terms of deliveries. Even out here in the US we’ve seen a slight growth in terms of quarter quarter deliveries. On the order backlog front, we ended the quarter with the highest Q1 order backlog in over two years.
Whilst the recent increase in gas prices has had a positive impact on the order rate, this improvement started before the uptrend in gas prices. This is due to the work done by the Tesla team in bringing more compelling and affordable vehicles to market. Ten years back when we launched Model 3 in the US with a promise of 35,000 starting price, which if you adjust today for inflation translates to about $48,000 in today’s dollar terms. The starting price of Model 3 today is way less than that. But while the product is way more compelling from where it started, given this setup, we’re focused on increasing our overall production volume, something that we already started in Q1.
This volume increase is evidenced by the Giga Berlin reaching a record output of over 61,000 units in Q1. We plan to keep growing volumes further, not just in Berlin, but across all our factories. Our biggest limiter continues to be our battery pack capacity and we are actively working on resolving that. Auto margins excluding credits improved sequentially from 17.9 to 19.2%. Note that we have had certain one time benefits from warranty true downs around 230 million and some relief on tariffs. We have not realized any benefit from the recent Supreme Court ruling on IPA tariffs as there is still a lot of uncertainty around the final outcome.
Both tariffs and sustained high interest rates continue to add to our automotive cost. Interest rate subvention costs are recognized upfront. If interest rates continue to rise, our cost of subvention will continue to impact auto margins. On the FSD adoption front, we continue to see improvement reaching nearly 1.3 million paid customers globally. The bulk of the growth came from subscriptions while upfront purchases only increased 7% as we removed the purchase option in some markets in Q1 we recently received approvals for FSD in Netherlands.
This sets up us well for a EU wide approval later in Q2 and you know we’re just gated by how the regulators go about it. Additionally, we’ve also received approvals in China. The broader approval is still not there, but we’re working with the regulators in the country and we’re hoping that we can get approval by Q3. With these approvals coming through, we expect the broader adoption of the software in the existing fleet and incremental demand for our vehicles. With all this in mind, we have evolved our vehicle sales strategy where we now emphasize FSG as a product and vehicle as only the delivery mechanism.
As we have noted previously, the energy storage business is inherently lumpy tied to customer deployment timelines. In Q1 we deployed 8.8 GWh of energy storage, a 38% sequential decline. However, we still expect 2026 deployments to be higher than 2025. We set yet another record with gross margins in this business over 39.5% due to some one time benefits from certain tariff recognitions of more than 250 million from certain tariffs which we paid in prior quarters on a normalized basis. We continue to expect energy compression from here with increasing competition and tariff impacts.
As previously discussed, tariffs in this business can have outsized impacts as most of the battery cells are procured from China. Our order backlog for this business is robust and we’re doing our best to build not just based on existing demand but also unexpected demand. Services and others improved sequentially from 8.8% to 9.2%. This includes a collection of efforts meant to support our customers like service centers, used cars, paid supercharging parts, sales, insurance and even our Robotaxi business.
We’re making deliberate investments in the infrastructure to help the Robotaxi in the future. We grew the Robotaxi fleet quarter over quarter and we expect to keep ramping the fleet as we accelerate and get into other geographies. On operating expenses side, we did increase sequentially from a full quarter stock based compensation expense for the 2025 CEO compensation plan for which one milestone is still deemed probable. Additionally, our spend on AI related initiatives, including expense on development of our own AI5 chip and new products like Cybercap, Semi optimus and megablock, etc.
Continue to be at elevated levels and we expect this trend to continue for the full year. 2026. Net income was impacted from mark to market charges on our Bitcoin holdings which depreciated 22% as compared to the last quarter, and the unfavorable impact of FX primarily from our large intercompany borrowings on free cash flow. We ended the quarter with just over 1.4 billion. As Elon mentioned, we are in a very big capital investment phase which is going to start now and would last a couple of years.
So based on that, our current expectation for 20252026 is over 25 billion of CAPEX. And you know, just to remind you, we are paying for six factories which we’re going to go into operation. Some have already started, some would go into operation later. Part of this year we’re further increasing our investment in AI related initiatives including the AI infrastructure to support Robotaxi and the launch of Optimus. We’ve already started placing orders for the research semiconductor FAB in Austin and for solar manufacturing equipment.
While this may seem a lot and we will have the impact of negative free cash flow for the rest of the year, we believe this is the right strategy to position the company for the next era. We’ll make such investments in a very capital efficient manner. We are actively working on our mission of building a future of amazing abundance. However, that requires not just a lot of investment but an immense amount of execution. The future is going to be great and the whole Tesla team is rising to the occasion to make this a reality.
I would like to end by thanking the Tesla team, our customers, investors and vendors for having confidence in us on this journey. Thanks.
Questions and Answers:
Travis Axelrod
Thank you very much Vyvhav now we’re gonna go to investor questions, starting with questions from sei.com the first question is when will we have the Optimus 3 reveal? Which we already touched on. But the rest of the question is when will Optimus production start? Since we ended the Model X and S production earlier this mid year. And then what’s the expected Optimus production rate exiting this year and what are the initial targeted skills?
Elon Musk
Well, as I was saying, what we found is that when we’ve unveiled various Optus versions, we’ve Optimus versions, we found out how competitors literally do a frame by frame analysis and copy everything we’re doing. So I think we want to push the Optimus 3 unveil maybe closer to production. Startup production is, we’re assuming is somewhere around the late July, August time frame. And I mean just to inject some reality into these questions, since these questions are not, you know, whoever does this question does not fully understand what happens with a production line.
The last Essex production will be in early May, but you have to look at the entire upstream portion of the production line. So you have to start with, you know, cells, battery packs, you know, motor production, all the parts production. And so we’ve been dismantling the SX production line, you know, from the, you know, more base level parts, base the more basic level parts to as you get to more larger sub assemblies, you start dismantling the line from the small parts first, not, not from the final assembly first.
So the final assembly line will, that’ll be dismantled next month and after the last of the Essex vehicles done. Now you can’t dismantle some gigantic production line like overnight. It takes at least a few months to do so. And then you’ve got to install a new production line and you’ve got to provide all of the wiring and communication, test out the machines of the new production line for Optimus. So that also takes several months. So frankly, if we’re able to go from stuffing production on one line, dismantling that entire line, reinstalling a whole new line and turning that on in a matter of four months, that is an insanely fast speed.
I don’t think any other company on earth has ever done that before. Just to put things into perspective and inject some reality into the situation here, I don’t know what the production rate of Optimus will be this year. It is impossible to predict these things. The when you have a brand new product in an entire new entirely new production line and you have 10,000 unique items, all of which have to go right to ramp production, it will move as fast as the least lucky, slowest, dumbest part in the entire 10,000 and this is Optimus is a completely new product with a completely new production line.
So it’s just literally impossible to predict, except that I think it will be quite slow at first as we iron out the 10,000 plus unique items that have to be sold for Optimus to reach volume production. Initial skills will be, obviously we’re going to start with simple skills in the factory and then build up from there.
Travis Axelrod
Great, thank you, Elon. The next question is what milestones are you targeting for unsupervised FSD and Robo taxi expansion beyond Austin this year and how will that drive recurring revenue?
Elon Musk
Well, we certainly hope to be have unsupervised FSD or slash Rover Taxi operating, you know, in, I don’t know, a dozen or so states by the end of this year. Initially, you know, we’re taking it very, we’re taking a very cautious approach to the rollout here. Like we haven’t had any injuries and certainly no fatalities to date with the unsupervised FSD and Rover Taxi expansion. We want to keep it that way. And so. I don’t, I think probably unsupervised FSD or Rover Taxi revenue will not be super material this year, but I do think it will be material, be material probably in a significant way next year.
Travis Axelrod
Great, thank you very much. The next question is, when do you expect FSD unsupervised to reach customer cars?
Elon Musk
I’m just guessing here, probably in the fourth quarter. It’s difficult to release this, like to everyone, everywhere, all at once because we do want to make sure that they’re not unique situations in a city that, you know, particularly complex intersection or, you know, actually they tend to be places where, where people get into accidents a lot because, because they’re just, you know, perhaps there’s like I said, an unsafe intersection or bad road markings or, you know, a lot of weather challenges.
So I think we would release unsupervised gradually to the customer fleet, you know, as we feel like a particular geography is confirmed to be safe.
Travis Axelrod
Great. And the next question is, how will Hardware 3 cars reach unsupervised FSD?
Elon Musk
Unfortunately, Hardware 3, I wish it were otherwise, but Hardware 3 simply does not have the capability to achieve unsupervised FSD. We did think at one point it would have that, but relative to hardware 4, it has only one eighth the memory bandwidth of hardware 4. And memory bandwidth is one of the key elements needed for unsupervised fsd. It’s just generally a thing that’s needed for AI if you’re doing an auto aggressive transformer, memory bandwidth is the choke point. So for customers that have bought fsd, what we’re offering is essentially a trade in, like a discounted trade in for cars that have AI4 hardware.
And we’ll also be offering the ability to upgrade the car to replace the computer and you also need to replace the cameras, unfortunately, to go to hardware for. So to do this efficiently, we’re going to have to set up like kind of micro factories or small factories in major metropolitan areas in order to do it efficiently. If it’s. Because if it’s done just at the service center, it’s, it is extremely slow to do so and inefficient. So we basically need like many production lines to make the change.
And I do think over time it’s going to make sense for us to convert all Hardware 3 cars to Hardware 4, because that’s what enables them to enter the Robotaxi fleet and have unsupervised fsd.
Unidentified Participant
And for what it’s worth, in the meantime, we’re going to also release a V14 version for hardware 3. This will be a distilled version of the same V14 software that we released for hardware 4. And people should be able to start the drives from Park State and basically have all the features that V14 for hardware 4 has. And that’s expected to come end of June.
Travis Axelrod
Great, thank you very much. The next question is, what enabled you to finish the AI5 tape out early and were there any changes to the original vision? Last week Elon said AI5 will go into Optimus and the supercomputer, but one month ago said it would go into the robo taxi. Has AI5 been dropped from the vehicle roadmap?
Elon Musk
Well, the reason AI5 tape out finished early was because the team worked incredibly hard to make it happen. And just over time we gathered a lot of momentum. But we did have to work every weekend for six months straight, including every holiday. So it was a lot of sacrifice by the team. And I was there, of course myself every weekend. And fortunately we didn’t encounter any major, we didn’t make any major mistakes that were at least that we’re aware of that required pushing out the tape out. So the team just did a great job and worked incredibly hard is the reason.
Yeah, I do expect that AI5 will go into Optimus and into the data center because it’s looking like we’ll be able to achieve unsupervised self driving with AI4. That is far greater than human safety. Levels, which means it’s certainly not immediately needed in the car. At some point I think it will make sense for us to switch to AI5 in the car, but that’s, but there’s not a pressing issue to do so. So. But at some point the AI4 hardware is going to get like so old that it’s like, okay, you know, the only reason they’re keeping the factory Open is for AI4.
We are planning an AI4 upgrade to use newer generation RAM. So it’ll go from 16 gigabytes to I think 32 gigabytes per SoC. So a total of 64 gigabytes and probably a 10% increase in computer into trillions of operations per second and in memory bandwidth. So that’s AI 4.1 or AI 4+. Probably goes into production middle of next year I think. Depends. It depends on Samsung’s doing the modifications for us. So it sort of depends on when they’re able to finish that, finish those modifications and bring it to production.
Travis Axelrod
Great. The next question is, now that FSD has been approved in the Netherlands and is expected to launch across Europe this summer, can you discuss your robotaxi strategy for the region?
Elon Musk
Well, we’re probably jumping a gun here on robotaxi in Europe since it took us an immense amount of time just to get supervised self driving approved in Europe. And you know, these, we don’t control the regulators. You know, it’s, we push as hard as we can, but that’s, it’s ultimately up to the governments in Europe and the EU to decide what, what to do. So yeah, as it is, we’ve only been approved in the Netherlands. We expect to be approved in a lot of other countries. And I think the supervised FSD goes to Brussels for EU review in May.
Yeah. So. Obviously the next thing beyond that is to aim for unsupervised self driving or over taxi in Europe. I actually don’t know what the timeframe for that is and would be somewhat at the mercy of the regulators as to when that approval would take place.
Unidentified Participant
And from a technology standpoint, what we deployed in Netherlands and Europe is the same exact architecture and the training procedure and so on, except it had more Europe data. And I suspect the same thing will be true for unsupervised FSD as well. Whatever we use to solve in the US will work in other places in the rest of the world too, provided we were able to add the data from the local regions.
Mark
Great.
Travis Axelrod
The next question is, given the recent NHTSA incident filings, can you update us on The Robotaxi safety data. If safety validation remains the primary bottleneck, why not deploy thousands of vehicles to accelerate removal of the safety driver?
Elon Musk
Do you want to take that?
Unidentified Participant
Yeah. We are increasing the amount of our QA fleet, but we also want to use the customer fleet to give us the useful metrics back so that we can scale it safely. Like Iran mentioned, we are absolutely focused on safety and so far we have zero incidents. And that’s what the NHTSA filing also shows. In addition to safety, we are also solving some of these so called scaling issues. For example, you do not want the robotaxi to be stuck blocking intersections or don’t want to be dropping people off at slightly incorrect locations and so on.
So we are simultaneously solving the long tail of safety by monitoring the metrics across the entire Tesla customer vehicle fleet, which are, you know, is close to driving 10 billion miles on FSD in the next few weeks. And also scaling up the amount of QA fleet that we have across the entire US to accelerate our safety validation while also scaling the rest of the factors that can throttle the increase of unsupervised vehicles.
Travis Axelrod
All right, the next question is, is V14 3 still the last piece of the puzzle to enable large scale, unsupervised FSD and Robotaxi or do we have to wait until V15?
Elon Musk
Well, No, I think 14.3 is the last piece of the puzzle for unsupervised FSD. Now the question is like degrees of safety, like how safety and convenience. I suppose we have a lot of known improvements, like major architectural improvements that we know would improve the probability of safety significantly. So I think it’s not going to make sense for us to deploy, you know, unsupervised FSD or Robotaxi at large scale when we know that there are major architectural improvements to the software that can improve safety.
So I think we’re going to want to finish writing that software, validate it and release it before going to large scale, unsupervised fsd, depending on what large scale means. I mean, we are of course, as I mentioned earlier, doing unsupervised FSD in three cities and we’ll expand and it took probably a dozen states or more later this year. So kind of depends on what your definition of large scale is. But I do think it wouldn’t be right for us to go to like very large scale and supervised FSD when we know that there are software improvements in the pipeline that would improve safety.
Unidentified Participant
Yep. And I’d like to note that the version of Robo taxi that’s running in Austin, Dallas. Those are essentially 14.3 variants and it’s obviously safe that that’s why we’re able to launch in those cities. And we continue to expand based on the V13, sorry, V14 3 base for a while until V15 lands. And V15 is going to be a major upgrade.
Elon Musk
Yeah,
Travis Axelrod
Great, thank you. The next two questions we’ve already answered about Robotaxi rollout, the data that we’re observing. So we will end on the last question, which is what is Tesla doing to scale the energy generation business with solar Residential roof deployments have stalled. Will Tesla move to regional solar and battery farms, perhaps coupled to superchargers, Will we deploy solar through utilities?
Unidentified Participant
Yeah, the overall US residential solar market is going through a bit of a correction after the loss of the homeowner tax credit last year. But we still see strong demand shaping up for the second half of the year. Tesla introduced a lease product this year that allows us to capture the tax credit ourselves and offer competitive pricing for homeowners. We have also debuted our own solar panel with superior performance and aesthetics, as well as our own best in class mounting system that gives us a fully integrated home energy ecosystem.
We believe, we strongly believe that solar and storage markets globally will continue to grow at both residential and utility scale and we will continue to invest in that growth.
Travis Axelrod
Great, thank you, Mike. So now we’re going to move on to analyst questions. The first question is going to come from Will Stein at Truist. Will, please feel free to unmute yourself when you’re ready.
Will Stein
Can you hear me?
Travis Axelrod
Yes, yes we can.
Will Stein
Great, great. Thanks for taking my question. Considering the various parties involved in the terrafab project, I’m hoping you can provide some details for investors about which party is going to take responsibility for each aspect of that project. Funding it, designing it, building it, operating, taking production and the like. We’d love to hear some, some more details.
Elon Musk
Yeah, so we’re still working out the the details of the terrafab deployment. In the near term, Tesla will be building the research fab on our Giga Texas campus. This is something we expect to be probably. A $3 billion ish initiative and capable of maybe a few thousand wafers per month. But it’s really intended to try out ideas the research lab, both in terms of maybe we have some ideas for improving the fundamental technology of how chips are made and some of the, some new physics we’d like to test out.
But we also want to test out the ability to, to see if something is working in production. So you need kind of like a few thousand wafer starts a month to make sure that a production process is sound. And then SpaceX is going to take care of like the initial phase of the scaled up terafab. And that’s what we’ve figured out thus far. You know, any kind of intra company thing has to be approved by both the SpaceX and Tesla board of directors. It’s got to go through a conflict resolution. It’s going to have a lot of, unfortunately a lot of complexity because we’ve got to make sure Tesla shareholders are served and SpaceX shareholders are served and strike the right balance there.
So it takes a while to work through the kind of independent director reviews on this. So that’s basically what we’ve figured out thus far is Tesla’s doing the research fab, SpaceX doing the initial part of the large scale Terrafab, and then we got to figure out the rest.
Will Stein
And what about Intel’s involvement?
Elon Musk
Yeah, so intel is excited to partner with us on some of the core manufacturing technologies. So we plan to use Intel’s 14A process which is state of the art and in fact not yet totally complete. So. But given that by the time terafab scales up, 14A will be probably fairly mature or ready for primetime, 14A seems like the right move. And we have a great relationship with Intel, a lot of respect for the CEO, the cto, the new team there. So we think it’s going to be a great partnership.
Vibhav Tineja
Yeah. And the other thing on the research fab, I think we’ve said it before, we plan to do memory, logic, everything in the same place, including mask, because we want to have a quick iteration loop so that we can see and basically scale the technologies which we are trying to bring up.
Elon Musk
Yeah, I think this will be unique in the world, or at least I’m not aware of any place where you have the lithography, mask creation and then logic, memory and packaging under one roof in one building. That’s about the fastest I could possibly imagine doing recursive research and development and being able to try out some pretty radical ideas, some of which have, you know, it’s kind of long shot stuff, but if some of these long shots pan out would be radical improvements in the wagef’s work.
Travis Axelrod
Great. The next question is going to come from Pierre at New Street. Pierre, please feel free to unmute yourself.
Pierre
Hey, thanks a lot for taking my question. A quick one. First on FSD adoption. So you have 180,000 new users paying users this quarter And I compare that to your overall install base, it might be 15%. But then if I shrink that to the US or to North America where most of them are, it’s probably more like 30, 35%. And I’m trying to. And I compare that you probably sold about 100,000 cars in North America in the quarter. So you’re winning twice more FSD users and you’re selling cars. And then if I add to that picture the fact that I guess it’s mostly hardware for owners who subscribe to fsd, it sounds like most drivers in North America who have hardware for would already be using fsd.
Is that the right way to think about it and the kind of like success FSD is meeting today? Is that the right way to think about it?
Vibhav Tineja
Yeah, I think you’re thinking about it the right way, Pierre. And the other thing which I’ll share is that, you know, you can’t just look at 1/4 versus the other quarter in terms of churn. But we are actually seeing churn of subscribers also coming down, which again is a reflection of the product is getting better. And obviously if subscriptions are going up, that is a good metric. The other thing also to note is that we are seeing customers actually drive longer, which again you could correlate it.
That’s why you have lesser churn, because people are liking the product. And if, I mean, I’ve said this before, if I just use my own personal behavior, right, I literally get in the car, I press a button and it just goes. And earlier I used to park, now I don’t even have to park. And that is the experience which we want everybody to gain. And that’s why you’re starting seeing it in the numbers come through.
Pierre
Excellent. Thank you. And if I maybe a quick follow up, completely different. It’s more on the Optimus architecture. And you talked about the partnership with XAI and Groq and I was wondering if you can share with us anything about how the system to intelligence is going to be implemented. Is that going to be onboard on chips inside Optimus or if we should think about like your fleet of like a million Optimus being produced a year actually driving very significant inference demand in data centers as well for system to thinking.
Elon Musk
Well, we think we can put a lot of intelligence locally in the robot and it certainly needs to be enough intelligence that if the robot gets disconnected, like if it’s a bad cellular signal or there isn’t WI fi, you know, Optimus can’t just get stuck, it needs to have enough local Intelligence that it can still do useful things, you know, even if it loses connection. Kind of like the car, like the car does not need any cellular or WI FI connection to be able to drive safely. Now I guess you can think of like Optimus needs kind of a manager to tell it what to do, broadly speaking.
Like if you know, otherwise it’s going to keep doing the same thing it did before. So, you know, I think you need kind of an orchestration AI which, you know, Grok would be good for orchestration and then for, you know, for Optimus’s voice, you know, having a low latency intelligent voice. AI Grok is actually very good for that. So if you want to talk to optimists and have kind of a, you know, a GROK level conversation, you kind of need to connect to a GROK level AI for that. But I would expect the amount of interaction, apart from like, you know, the voice, voice stuff and asking complicated questions of the robot that necessarily needs a large AI model to answer the, you know, Gronk would probably have about as much interaction with Optimus as a manager would have with the people on their team.
So meaning Optimus could probably work for several hours without any management oversight.
Travis Axelrod
Great. The next question is going to come from Dan at Barclays. Dan, please feel free to unmute yourself.
Dan
Great. Good evening, thank you for taking questions. Elon, your chip suppliers generally generate pretty good economics on the chip they sell. Your approach has historically been on vertical integration. Part of that has been to get better economics. So I know the longer term goal of Terrafab is to get the supply you need, but how much of Tarifab is also motivated to get better economics on your midterm chip purchases? And how long is it going to take to ramp to get to yield that achieves that type of economic parity?
Elon Musk
No, I mean Terraform is not some sort of mechanism to generate leverage over our chip suppliers. It’s just literally we don’t see a path to having enough, sufficient quantity of AI chips down the road as we scale production to high levels. Just the rate at which the chips. That industry is growing in logic, but even more so in memory is just doesn’t, you know, we just anticipate hitting the wall if we don’t make shifts ourselves. So that’s, that’s the reason for the Terafab. I think that we do have some ideas for how to make maybe radically better AI chips.
These are kind of research ideas there, you know, which means like long shot, but if long shot pays off, it’s maybe A giant improvement. And it’s just easier to do that if we have our own research fab and are developing our own production technologies. So. And if you look sort of long term at say, having AI satellites making chips for those, there’s just no way in hell the existing industry can keep up with that. It’s impossible.
Travis Axelrod
All right, and our next question is going to come from Mark at Goldman Sachs. Mark, please feel free to unmute yourself.
Mark
Yes, good afternoon. Thank you very much for taking my question. I recognize the importance of FSD and that FSD can help to drive vehicle sales, and nice to see some of the improvements in the FSD technology more recently with version 14. However, I’m also hoping to understand if the company’s view on new vehicle models has evolved. And I asked, given that Elon, you posted on X recently, that Tesla could develop a family vehicle. There’s also been some past discussion about a compact vehicle.
Elon Musk
Well, I mean, Cybercap is the compact beagle. It’s actually, I mean, it’s very roomy, but it’s a, it’s a two person vehicle. And we do think probably most of our production long term will be cybercap because 90% of miles driven are with two of one or two people. So it would mean that, you know, you’d want a vast majority of your production to be Cybercap then, but over time it’s going to make sense for our whole lineup to be autonomous vehicles of different sizes. And I, I did talk a bit about this when we did the kind of AI day in LA at Warner Brothers and you know, showed like, this is our current lineup and this is what, you know, some idea of what our future lineup will be, which is that it’s going to be almost entirely autonomous.
In fact, long term, the only manually driven car will be the new Tesla Roadster. Speaking of which, we may be able to debut that in a month or so. It requires a lot of testing and validation before we can actually have a demo and not have something go wrong with the demo. But I think it will be one of the most exciting product unveils ever. I’m not sure. I don’t think it moves the needle massively from a revenue standpoint, but it is very cool. I think it might be one of the most spectacular demos ever.
Travis Axelrod
All right, Mark, did you have a follow up question?
Mark
Thanks, Travis. My other question was on batteries and the company mentioned batteries as a constraint on its growth. Can you speak more to how Tesla expects to resolve this and to what extent that might come from ramping up your own LFP and 4680 battery cell manufacturing, or is this something that you would expect to resolve primarily with increased sourcing from suppliers? Thank you.
Vibhav Tineja
Yeah, so at the moment, I think the limiter is not the cells itself, it’s the battery pack capacity. And, you know, we’re, like I said in my opening remarks, we’re actively working on resolving this. There’s more capacity being added as we speak, and I’ll let Lars add a few more things to it.
Unidentified Participant
Yeah, thanks, Vehwab. As you guys may have seen in Berlin, we started launching a model Y battery pack with our in house 4680 cells a few months ago. And that is ramping up nicely, adding to Berlin’s output and helping with the demand surge that we’ve seen in Europe as well. We’re adding additional capacity in our Reno facility, sort of retooling it as it’s been building packs now for, you know, almost 10 years. And in order to put in some more efficient lines and get, you know, additional output out there.
And then, you know, we continue to have growth in China as well, ramping in house LFP module production and battery packs associated with that. So all of those things are happening now and in the next months. And that’s, you know, really plans we laid out a few months back to increase that, that output with the growing demand.
Travis Axelrod
All right, thank you guys. And our next analyst is going to be Colin from Wells Fargo. Colin, please feel free to unmute yourself.
Colin
Oh, great. Thanks for taking my questions. You moved the safety driver in Austin and you’re now expanding into Allison Houston. What are the key safety metrics that you’re tracking that gives you confidence that robotaxi is safe enough to expand? Is it sort of miles per intervention, miles per accident, per fatality? And where do you stand on that now?
Unidentified Participant
Yeah, we track basically all the metrics that you mentioned. We have a pretty large QA fleet spread across all of the United States. And then we look at any intervention that could happen and then sort of simulate both in practice and also in our simulators that are very, very good nowadays, using neural networks as what would have happened. And then based on all these analysis, in the end make the call to expand. And so far all of the expansions have gone according to our expectations.
Elon Musk
Yeah, a lot of the limiting, a lot of what limits wider deployment of road tax are actually not safety issues, but convenience issues or the car basically gets paranoid and gets stuck. Like sometimes it gets because it’s programmed for maximum safety. So the problem is that then it sometimes just gets scared to do things. So like sometimes it gets scared to cross railroads, for example, or it’ll get stuck at a light where there’s, the light never changes from red. Or I mean, there was one kind of amusing situation where a whole bunch of robo taxis got stuck in the left turn lane in Austin because I kid you not, a Waymo had crashed into a bus and so they could not turn left because the Waymo had crashed into the bus.
And so you had this like long line of like, I don’t know, a dozen or more Tesla Robo taxis that we’re waiting for the bus to move, but the bus was never going to move because the Waymo is crashed into the bus. So that obviously drives people crazy if there’s a whole bunch of robo taxis blocking the whole road. So it’s a ton of things like that. That’s the single biggest thing, is just the car being scared to move or getting kind of stuck in situations like that. We’ve also had literal infinite loops where the car might want to make a turn into a road, but there’s construction and then it goes around the block, tries to turn into the road with construction, goes around the block, tries to in the road.
And so you have to stop the infinite looping, the literal infinite looping. So those are actually, and those are by far the issues that we have to resolve as opposed to direct safety issues.
Colin
Got it. Great.
Elon Musk
And
Colin
Then did you have a follow up comment? Yeah, just last year I asked about, you know, FSD and camera and the issues with sun glare and you noted that there was a breakthrough with direct photon counting that addressed this issue. But a month ago there was a NHTSA filing saying that they haven’t received an update when the solution was deployed and the number of vehicles. Is this, did it require a retrofit of the camera? Is this fully deployed? I guess I’m just curious since the filing mentioned it.
Unidentified Participant
Yeah. First I want to say we did, you know, change the cameras some months ago and those are out. And the NHTSA flying is referring to like older vehicles. We always work directly with NHTSA on all of the issues that they raise with us. And there’s, they’re asking for quite a bit of information and you know, we’re complying with that in as timely a manner as possible. And so we expect to resolve that and any of the other investigations in short order.
Unidentified Participant
Yeah. And we have also implemented stricter measures for the visibility of the camera. So in recent software builds, if the camera is not able to see things clearly because of, you know, residue buildup or what have you, then the FSD won’t be available for those cars.
Elon Musk
It just needs. You have to clean the inside of the windscreen.
Travis Axelrod
Great. That, unfortunately, is all the time we have today. We appreciate everyone’s questions and we look forward to talking to you next quarter. Thank you very much and goodbye, Sam.