Adam Jonas: Okay. My follow-up, Elon, on future product. If you had nailed execution, assuming that you nail execution on your next-gen cheaper vehicles, more aggressive giga castings, I don’t want to say one piece, but getting closer to one piece, structural pack, unboxed, 300-mile range, $25,000 price point, putting aside robotaxi, those features unique to you. How long would it take your best Chinese competitors to copy a cheaper and better vehicle that you could offer a couple of years from now? How long would it take your best Chinese competitors to copy that? Thanks.
Elon Musk: I mean, I don’t know what our competitors could do, except we’ve done relatively better than they have. If you look at the drop in our competitors in China sales versus our drop in sales, our drop was less than theirs. So we’re doing well. But I think Cathy Wood said it best, like really, we should be thought of as an AI or robotics company. If you value Tesla as just like an auto company, you just have to – fundamentally, it’s just the wrong framework and it will come to be. If you ask the wrong question, then the right answer is impossible. So I mean, if somebody doesn’t believe Tesla is going to solve autonomy, I think they should not be an investor in the company. Like, that is – but we will and we are. And then you have a car that goes from 10 hours of use a week, like 1.5 hours a day to probably 50%, but it costs the same.
Vaibhav Taneja: I think that’s the key thing to remember, right, especially if you look at FSD Supervised, if you didn’t believe in autonomy, this should give you a review that this is coming. It’s actually getting better day by day.
Elon Musk: Yes. If you’ve not tried the FSD 12.3, and like I said, 12.4 is going to be significantly better and 12.5 even better than that. And we have visibility into those things. Then you really don’t understand what’s going on. It’s not possible.
Vaibhav Taneja: Yes. And that’s why we can’t just look at just as a car company because a car company would just have a car. But here, we have more than a car company because the cars can be autonomous. And like I said, it’s happening.
Ashok Elluswamy: Yes. This is all in addition to Tesla – the overall AI community is just like increasing – like, improving rapidly.
Elon Musk: Yes. I mean we’re putting the actual auto in automobile. So sort of – we go like, well, sort of like tell us about future horse carriages you’re making. I’m like, well, actually, it doesn’t need a horse that’s the whole point. That’s really the whole point.
Martin Viecha: Okay, thank you. The next question comes from Alex Potter from Piper Sandler. Alex, please go ahead and unmute.
Alex Potter: Great, thanks. Yes, so I couldn’t agree more. The thesis hinges completely on AI, the future of AI, full self-driving neural net training, all of these things. In that context, Elon, you’ve spoken about your desire to obtain 25% voting control of the company. And I understand completely why that would be. So I’m not necessarily asking about that. I’m asking if you’ve come up with any mechanism by which you can ensure that you’ll obtain that level of voting control. Because if not, then the core part of the thesis could potentially be at risk. So any additional commentary you might have on that topic.
Elon Musk: Well, I think no matter what Tesla, even if I got kidnapped by aliens tomorrow, Tesla will solve autonomy, maybe a little slower, but it would solve autonomy for vehicles at least. I don’t know if it would winon with respect to Optimus or with respect to future products, but it would that there’s enough momentum for Tesla to solve autonomy even if I disappeared for vehicles. Yes, there’s a whole range of things we can do in the future beyond that. I’ll be more reticent with respect to Optimus, if we have a super-sentient humanoid robot that can follow you indoors and that you can escape, we’re talking terminator-level risk. And yes, I’d be uncomfortable with. If there’s not some meaningful level of influence over how that is deployed.
And if there’s shareholders have an opportunity to ratify or reratify the sort of competition because I can’t say that. That is a fact. They have an opportunity. And yes, we’ll see. If the company generates a lot of positive cash flow, we could obviously buy back shares.
Alex Potter: All right. That’s actually all very helpful context. Thank you. Maybe one final question and I’ll pass it on. OpEx reductions, thank you for quantifying the impact there. I’d be interested also in potentially more qualitative discussion of what the implications are for these headcount reductions. What are the types of activities that you’re presumably sacrificing as a result of parting ways with these folks? Thanks very much.
Vaibhav Taneja: So like we said, we’ve done these headcount reductions across the board. And as companies grow over time, there are certain redundancies. There’s some duplication of efforts, which happens in certain areas. So you need to go back and look at where all these pockets are, get rid of it. So we’re basically going through that exercise wherein we’re like, hey, how do we set this company right for the next phase of growth. And the way to think about it is any tree which grows, it needs pruning. This is the pruning exercise which we went through. And at the end of it, we’ll be much stronger and much more resilient to deal with the future because the future is really bright. Like I said in my opening remarks, we just have to get through this period and get there.
Elon Musk: Yes, we’re not giving up anything that is significant that I’m aware of. So we’ve had a long period of prosperity from 2019 to now. And so if a company sort of organizationally is 5% wrong per year, that accumulates to 25%, 30% of inefficiency. We’ve made some corrections along the way. But it is time to reorganize the company for the next phase of growth and you really need to reorganize it, just like a human when we start off with one cell and kind of zygote, blastocyst and you start growing arms and legs and briefly, you have a tail. And so…
Alex Potter: But you shed the tail.
Elon Musk: You shed the tail, hopefully. And then you’re baby, you basically, you have to be the organism – a company is kind of like creature growing. And if you don’t reorganize it for different phases of growth, it will fail. You can’t have the same organizational structure if you’re 10 cells versus 100 cells versus 1 million cells versus 1 billion cells versus 1 trillion cells. Humans are around 35 trillion cells, doesn’t feel like it feels like, like one person. But you’re basically a walking cell colony of roughly 35 trillion depending on your body mass and about three times that number in bacteria. So anyway, you’ve got to reorganize the company for a new phase of growth or will fail to achieve that growth.
Martin Viecha: Thank you. Let’s go to Mark Delaney from Goldman Sachs. Mark please go ahead and unmute.
Mark Delaney: Yes. Good afternoon. Thanks very much for taking the question. The company previously characterized potential FSD licensing discussions in the early phase and some OEMs had not really been believing in it. Can you elaborate on how much the licensing business opportunity you mentioned today has progressed? And is there anything Tesla needs to achieve with the technology in terms of product milestones in order to be successful at reaching a licensing agreement in your view?
Elon Musk: Well, I think we just need to – it just needs to be obvious that our approach is the right approach. And I think it is. I think we’ve now with 12.3, if you just have the car drive you around; it is obvious that our solution with a relatively low-cost inference computer and standard cameras can achieve self-driving. No LiDARs, no radars, no ultrasonic nothing.
Vaibhav Taneja: No heavy integration work for vehicle manufacturers.
Elon Musk: Yes. So it really just be a case of having them use the same cameras and inference computer and licensing our software. But once it becomes obvious that if you don’t have this in a car, nobody wants your car. It’s a smart car. I still remember in, back when Nokia was king of the hill, Yes, crushing. And they certainly come out with a smartphone that was basically a break with limited functionality. And then the iPhone and Android, people still do not understand that all the phones are going to be that way. There’s not going to be any flip [ph] phones. If there will be a niche product.
Lars Moravy: Or home phones.
Elon Musk: Yes, no even exactly. When is the last time you saw a home phone.
Lars Moravy: No idea in a hotel, sometimes in hotels.
Elon Musk: Yes, the hotels have them. Yes. So the people don’t understand all cars will need to be smart cars, or you will not sell or the car will not – nobody would buy it. Once that becomes obvious, I think licensing becomes not optional.
Mark Delaney: It becomes a method of survival?
Elon Musk: Yes, absolutely, it is. License it or nobody will buy your car.
Vaibhav Taneja: I mean one other thing which I’ll add is in the conversations, which we’ve had with some of these OEMs, I just want to also point out that they take a lot of time in their product life cycle.
Elon Musk: Yes.
Vaibhav Taneja: They’re talking about years before they will put it in their product. We might have a licensing deal earlier than that, but it takes a while. So this is where the big difference between us and them is, right?
Elon Musk: Yes, I mean, really a deal signed now would result in it being in a car probably three years.
Vaibhav Taneja: That would be early.
Elon Musk: Yes. That’s like lightening basically.
Lars Moravy: That’s in eager [ph] OEM.
Elon Musk: Yes. So I wouldn’t be surprise if we do sign a deal. I think we have a good chance we do sign a deal this year, maybe more than one. But yes, it would be probably three years before it’s integrated with a car. Even though all you need is cameras and our inference computer. So just talking about a massive design change.
Vaibhav Taneja: Yes. And again, just to clarify, it’s not the work which we have to do. It’s the work which they have to do, which will take the time.
Elon Musk: Yes.
Vaibhav Taneja: Mark, is it helpful?
Mark Delaney: Yes, very helpful. Thank you. My follow-up was to better understand Tesla’s approach to pricing going forward. Previously, the company had said that the price reductions were driving incremental demand with how affordable the cars have become, especially for vehicles that have access to IRA credits and some of the leasing offers that Tesla has in place. Do you still see meaningful incremental price reductions as making sense from here for the existing products? And can the company meaningfully lower prices from here and also stay free cash flow positive on an annual basis with the current product set? Thanks.
Elon Musk: Yes. I think we can be free cash flow positive meaningfully.
Lars Moravy: I think Vaibhav said it in his opening remarks, like our cost down efforts, we basically were offsetting the price cut like we’re trying to give it back to the customers.
Elon Musk: Yes. I mean the end of the day, like for any given company, if you sell a great product at a great price – if you have a great product at a great price, the sales will be excellent. That’s true of any area. So over time, we do need to keep making sure that we’re – that it’s a great product at a great price. And moreover, that price is accessible to people. So it’s not – you have to solve both the value for money and the fundamental affordability question. The fundamental affordability question is sometimes overlooked. If somebody is earning several hundred thousand dollars a year, they don’t think of a car from a fundamental affordability standpoint. But from vast majority of people are living paycheck to paycheck. So it actually makes a difference if the cost per month for lease refinancing is $10 one way or the other. So it is important to keep improving the affordability and to keep making the price.
Lars Moravy: More accessible.
Elon Musk: Yes, exactly. Make the price more accessible, the value for money better, and to keep improving that over time.
Lars Moravy: But also make kick as cost that people want to buy.
Elon Musk: Yes, it’s going to be a great product and at a great price. And the standards for what constitutes great product at a great price keep increasing. So there’s like – you can’t just be static. You have to keep making the car better, improving the price, but improving the cost of production, and that’s what we’re doing.
Vaibhav Taneja: Yes. And in fact, like I said in my opening remarks also, like the revised – the updated Model 3 is a fantastic car. I don’t think people fully even understand that lot of engineering effort which has gone and Lars and team have actually put out videos explaining how much the car is different. I mean it looks and feels different. Not only it looks and feels different. We’ve added so much value to it, but you can lease it for like as low as $299 a month.
Lars Moravy: Without gas.
Vaibhav Taneja: Yes.
Martin Viecha: All right. The next question comes from George from Canaccord. George, please go ahead and unmute.
Unidentified Analyst: Hi, thank you for taking my question. First, could you please help us understand some of the timing of launching FSD in additional geographies, including maybe clarifying your recent comment about China? Thank you.
Elon Musk: I mean like new markets, yes, we are – there are a bunch of markets where we don’t currently sell cars that we should be selling cars in. We’ll see some acceleration of that.
Unidentified Analyst: And FSD new markets?
Elon Musk: Yes. So think about the end-to-end neural net-based autonomy is that just like a human, it actually works pretty well without modification in almost any market. So we plan on – with the approval of the regulators, releasing it as a supervised autonomy system in any market that – where we can get regulatory approval for that, which we think includes China. So yes, it’s – just like a human, you can go rent a car in a foreign country and you can drive pretty well. Obviously, if you live in that country, you’ll drive better. And so we’ll make the car drive better in these other countries with country-specific training. But it can drive quite well almost everywhere.
Vaibhav Taneja: The basics of driving are basically same everywhere like car is a car, the traffic lights, road is the road. Yes.
Elon Musk: It understands that it shouldn’t hit things, no matter what the road rules are.
Vaibhav Taneja: Exactly. There are some road rules that you need to follow. And in China, you shouldn’t cross over a solid line to do a lane change. In U.S. it’s a recommendation I think. In China, you get fined heavily if you do that. We have to do some more actions, but it’s mostly smaller reduction. It’s not like the entire change or type or something.
Elon Musk: Yes.
Martin Viecha: Hey, George, do you have a follow-up?
Unidentified Analyst: Yes. So my follow-up has to do with the first quarter deliveries and I’m curious as to whether or not you feel that supply constraints that you mentioned throughout the release impacted the results and maybe can you help us quantify that? And is that why you have some confidence in unit growth in 2024?
Vaibhav Taneja: Yes. I think we did cover this a little bit in the opening remarks to you. Q1 had a lot of different things which are happening. Seasonality was a big one, continued pressure from the macroeconomic environment. We had attacks at our factory. We had Red Sea attacks, we are ramping Model 3, we’re ramping Cybertruck. All these things are happening. I mean, it almost feels like a culmination of all those activities in a constrained period. And that gives us that confidence that, hey, we don’t expect these things to recur.
Elon Musk: Yes. We think Q2 will be a lot better.
Vaibhav Taneja: Yes.
Lars Moravy: It’s just one thing after another. Our Cybertrucks are crazy. Thank you.
Elon Musk: Yes, exactly. It’s just – if you’ve got cars that are sitting on ships, they obviously cannot delivered to people. And if you’ve got the excess demand for Model 3 and Model Y in one market, but you don’t have it there. It’s quite a – it’s extremely complex logistics situation. So I’d say also the – we did overcomplicate the sales process, which we’ve just in the past week or so have greatly simplified. So it became far too complex to buy a Tesla, whereas it should just be you can buy the car in under a minute. So we’re getting back to that you can buy a Tesla in under an minute interface from what was quite complex.
Martin Viecha: Okay, thank you. Let’s go to Colin Rusch from Oppenheimer. Colin, go ahead and unmute, please.
Colin Rusch: Thanks so much, guys. Given the pursuit of Tesla really as a leader in AI for the physical world, in your comments around distributed inference, can you talk about what that approach is unlocking beyond what’s happening in the vehicle right now?
Elon Musk: Do you want to say something?
Ashok Elluswamy: Yes. Like Elon mentioned like the car even when it’s a full robotaxi it’s probably going to be used 150 hours a week.
Elon Musk: That’s my guess like a third of the hours of the week.
