Martin Viecha and Elon Musk welcomed everyone to Tesla's Second Quarter 2023 Q&A Webcast, where they discussed their Q2 results of record vehicle production and deliveries, and record revenue of $25 billion. They also mentioned Model Y becoming the bestselling vehicle globally in Q1, and their goal of 1.8 million vehicle deliveries this year. Elon mentioned that Q3 production may be slightly down due to summer shutdowns for factory upgrades, and that autonomy is expected to drive future volume to the next level.

Tesla is revolutionizing the way they manufacture robotaxis and they are utilizing Autopilot and Dojo to train their neural net with data from millions of vehicles. The Dojo training computer is designed to reduce the cost of neural net training and it is optimized for video training. Tesla expects to use both NVIDIA and Dojo for neural net training due to the need for a massive amount of data.

Tesla is on the cutting edge of AI development and has driven 300 million miles using FSD beta. They are currently building release candidates of the Cybertruck at the Gigafactory in Austin and plan to start delivering it later this year. The global Supercharging network now consists of over 50,000 connectors and 5,000 locations, and the Tesla Charging Standard has been made open source and is now known as the North American Charging Standard.

Tesla is continuing to focus on making cars while maintaining healthy financials. They are also in early discussions with major OEMs to license their Full Self-Driving software and hardware. They have also made progress with their lithium refinery and cathode facility. They thank their employees for their hard work and for the impact they are making.

The company is investing heavily in core technologies, such as AI, and capacity expansion, while also working towards maximizing volumes and reducing per unit costs in their automotive and energy businesses. They are also focusing on cost reductions in materials, manufacturing, logistics, and customer AR, as well as improving deal economics with Megapack.

Martin Viecha thanked the team for increasing 4680 cell production by 80% Q2 over Q1 and surpassing 10 million production cells. The team also reduced scrap bill by 40% and cell COGS by 25%. They are preparing to launch their Cybertruck cell which has 10% higher energy density than current production and is at their expectations on a like-for-like electrochemistry basis.

Tesla is continuing to grow their Megapack and Autobidder projects globally, and are on track to meet their 2023 contracted projects. The Megapack margins are in line with their target margins, and the second final assembly line at Lathrop is on schedule. They have several large projects in construction or nearing completion, including the KES project in Hawaii, the Riverina project in Australia, and several products in California and at the Gigafactory in Texas. They have over 6 gigawatt hours under Tesla's dispatch for next year.

Tesla recently surpassed 0.5 million Powerwalls installed and has launched Charge on Solar, which allows customers to charge their vehicles using excess solar. They have also begun paying customers in Texas for participating in their virtual power plant and are expanding Tesla electric enrollment to new Model 3 owners in Texas. The value of residential energy software and hardware will depend on the level of market access that utilities, market operators and regulators permit. The benefits to COGS per unit from the IRA battery manufacturing incentives and battery raw material declines year-to-date have not been quantified.

Zachary Kirkhorn discussed the manufacturing incentives, commodity improvements, and cost reductions that Tesla experienced in Q2. These improvements include a 50-50 sharing of credits from their long-term battery partner Panasonic, as well as benefits from lithium, aluminum, and steel. The SX mix of deliveries increased from Q1 to Q2, and the cost of production from the Austin and Berlin factories were slightly above Model Y production costs. All of these factors contributed to the same size and magnitude of IRA benefits that Tesla received in Q2.

Elon Musk announced that Tesla will allow transfer of FSD in Q3 as a one-time amnesty. He also discussed the high demand for the Cybertruck, which has a lot of new technology and does not look like any other vehicle.

Elon Musk and Lars Moravy discussed the criticism that Gigacasting makes vehicles harder and more costly to repair, pushing costs onto the customer. They argued that traditional bodies are also difficult to repair and that Gigacasting is actually cheaper and faster. The design team works with the collision repair team to design parts that make it easier and faster to repair, incentivized by their own insurance and body shops.

Elon Musk and Lars Moravy discussed Tesla's collision repair process, which has been made cheaper and faster due to design changes to the castings. They also discussed the Optimus bots, which are humanoid robots that can do tasks that humans can do. There are currently 10 million Optimus bots, and they have to use custom-designed actuators as there are no off-the-shelf actuators that work well for humanoid robots.

Tesla is designing custom actuators for volume production that are lighter, tighter, and more capable than any other actuators. They expect to have the first production candidate walking around in November and to have it do something useful in their factories sometime next year. Additionally, they hope to use a combination of Neuralink implants and robotic arms/legs to help amputees for a much lower cost than $6 million. Lastly, Elon Musk discussed how Tesla decides when to reduce prices or offer sales incentives to increase demand.

Elon Musk talks about how demand for Tesla cars has roughly tracked production. He also discusses the challenges of car buying in times of economic uncertainty, such as when interest rates rise dramatically. He expresses his concern for small shareholders and advises against margin loans during turbulent times. He also expresses his lack of knowledge about the macro shocks and thematic depressive nature of the stock market.

Elon Musk does not have a crystal ball to predict when automotive gross margins will stabilize or rise due to efficiencies outpacing cuts in order to drive volume growth. He does, however, recommend buying stock in a company that makes good products and has a great future pipeline, and to buy low and sell high. Warren Buffett's analogy is that a publicly traded company is like living in a house where a manic-depressive person stands outside and yells property prices at you every day, but the house remains the same.

Elon Musk and Zachary Kirkhorn agree that Tesla's short-term variances in gross margin and profitability are minor compared to the long-term picture. They both believe that Tesla's long-term investment in new technology and vertical integration will pay off in the end. They recommend looking to ARK Invest and Fintwit for the best information on the market. They also suggest buying when the market panics and selling when it is too exuberant. Lastly, they emphasize the importance of focusing on near-term cost reduction in order to generate enough cash to invest in the company's portfolio of products and technologies.

Elon Musk is asked about the resource outlay for their AI and Dojo efforts, which they are accelerating. He clarifies that he is asking about R&D on Dojo, and states that they will not be open loop on their Dojo expenditures. He implies that they will be monitoring their expenditures closely.

Dojo is a custom silicon designed to optimize for video training, which has a higher ratio of compute-to-memory bandwidth than LLMs. The company is spending over $1 billion on Dojo and has a staggering amount of video data to process. They are also using NVIDIA hardware and are aiming to be 10-100 times better than humans.

Elon Musk and Zachary Kirkhorn discuss the number of automotive deaths and serious injuries per year, and the need for more training compute to achieve full self-driving. They also note that there is macro uncertainty, but Tesla is sticking with their near-term volume target of 50% CAGR. They are not willing to sacrifice on pricing or margins to achieve this goal.

Elon Musk has been optimistic in the past about achieving full self-driving capabilities, but his predictions have been met with some skepticism. He believes that the progress towards full self-driving will be rapid initially, but will then slow down logarithmically. He is considering lowering the price of FSD in order to increase take rates, and is targeting a non-beta version in the future.

Elon Musk believes that the FSD technology Tesla offers is a low price, and they offer it as a monthly subscription. He also believes that the value of the car increases greatly with the autonomous feature. He then goes on to discuss his other AI venture, x.ai, and how it will enhance the value of Tesla.

Elon Musk explains that the genesis of xAI was due to the best AI engineers and scientists wanting to work at a startup instead of a large established company like Tesla. He further explains that the best talent in the world are willing to work at both Tesla and SpaceX, which has been beneficial to Tesla. Lastly, Musk believes that the 1.8 million unit number can be hit with current pricing, but that affordability of cars may be affected if interest rates continue to rise.

Elon Musk is discussing the complexity of the software stack for Dojo and how it is a combination of open source and Tesla software. He also addresses geopolitical risks associated with Tesla's capacity expansion, noting that they are trying to have factories in multiple parts of the world so that if something happens in one area, they can still keep production going in other areas.

Tesla has been making progress reducing costs and has seen deflationary pressures on commodity prices, as well as improvements in unit economics and economies of scale. Additionally, they have improved automation and labor efficiency, leading to a trend of becoming more efficient.

Elon Musk, Zachary Kirkhorn, and Karn Budhiraj discussed the cost of lithium and cobalt, as well as the cost reduction strategies that Tesla has implemented. They discussed the importance of ramping up production, improving quality, and focusing on logistics to reduce costs. They noted that, despite the shift in mix and product type, Tesla had seen the largest cost reduction in a while from Q1 to Q2. Musk likened the cost reduction process to a "Game of Thrones with pennies".

Martin Viecha and Elon Musk asked Mark Delaney to ask a follow-up question about the downtime impact on production and margin impact from the planned factory upgrades. Zachary Kirkhorn responded that they don't know the exact number of cars impacted by the downtime, but they are trying to minimize it. Elon then said that they were getting too far into the weeds and that it was not possible to answer with precision. The call then ended with Martin thanking everyone.

This summary was generated with AI and may contain some inaccuracies.