Ashok Elluswamy: Yes. It could be more or less, but then there’s certainly going to be some hours left for charging and cleaning and maintenance in that world, you can do a lot of other workloads, even right now we are seeing, for example, these LLM companies have these like batch workloads where they send a bunch of documents and those run through pretty large neural networks and take a lot of compute to chunk through those workloads. And now that we have already paid for this compute in these cars, it might be wise to use them and not let them be idle, be like buying a lot of expensive machinery and leaving to them idle. Like we don’t want that, we want to use the computer as much as possible and close to like basically 100% of the time to make it a use of it.
Elon Musk: That’s right. I think it’s analogous to Amazon Web Services, where people didn’t expect that AWS would be the most valuable part of Amazon when it started out as a bookstore. So that was on nobody’s radar. But they found that they had excess compute because the compute needs would spike to extreme levels for brief periods of the year and then they had idle compute for the rest of the year. So then what should they do to pull that excess compute for the rest of the year? That’s kind of…
Ashok Elluswamy: Monetize it
Elon Musk: Yes, monetize it. So, it seems like kind of a no-brainer to say, okay, if we’ve got millions and then tens of millions of vehicles out there where the computers are idle most of the time that we might well have them do something useful.
Ashok Elluswamy: Exactly.
Elon Musk: And then, I mean, if you get like to the 100 million vehicle level, which I think we will, at some point, get to, then – and you’ve got a kilowatt of useable compute and maybe your own hardware 6 or 7 by that time. Then you really – I think you could have on the order of 100 gigawatts of useful compute, which might be more than anyone more than any company, probably more than a company.
Ashok Elluswamy: Yes, probably because it takes a lot of intelligence to drive the car anyway. And when it’s not driving the car, you just put this intelligence to other uses, solving scientific problems or answer in terms of someone else.
Elon Musk: It’s like a human, ideally. We’ve already learned about deploying workloads to these nodes
Ashok Elluswamy: Yes. And unlike laptops and our cell phones, it is totally under Tesla’s control. So it’s easier to distribute the workload across different nodes as opposed to asking users for permission on their own cell phones to be very tedious.
Elon Musk: Well, you’re just draining the battery on the phone.
Ashok Elluswamy: Yes, exactly. The battery is also…
Elon Musk: So like technically, I suppose like Apple would have the most amount of distributed compute, but you can’t use it because you can’t get the – you can’t just run the phone at full power and drain the battery.
Ashok Elluswamy: Yes.
Elon Musk: So, whereas for the car, even if you’re a kilowatt level inference computer, which is crazy power compared to a phone. If you’ve got 50 or 60 kilowatt hour pack, it’s still not a big deal to run if you are plugged it – whether you plugged it or not – you could be plugged in or not like you could run for 10 hours and use 10-kilowatt hours of your kilowatt of compute power.
Lars Moravy: Yes. We got built in like liquid cold thermal management.
Elon Musk: Yes, exactly.
Lars Moravy: Exactly for data centers, it’s already there in the car.
Elon Musk: Exactly. Yes. Its distributed power generation – distributed access to power and distributed cooling, that was already paid for.
Ashok Elluswamy: Yes. I mean that distributed power and cooling, people underestimate that costs a lot of money.
Vaibhav Taneja: Yes. And the CapEx is shared by the entire world sort of everyone wants a small chunk, and they get a small profit out of it, maybe.
Elon Musk: Yes.
Colin Rusch: Thanks so much guys. And just my follow-up is a little bit more mundane. Looking at the 4680 ramp, can you talk about how close you were to target yields and when you might start to accelerate incremental capacity expansions on that technology?
Elon Musk: We’re making good progress on that. But I don’t think it’s super important for at least in the near term. As Lars said, we think it will be exceed the competitiveness of suppliers by the end of this year and then we’ll continue to improve.
Lars Moravy: Yes. I mean, I think it’s important to note also that like the ramp right now is relevant to the Cybertruck ramp.
Elon Musk: Yes.
Lars Moravy: And so like we’re not going to just randomly build 4680s unless we have a place to put them and so we’re going to make sure we’re prudent about that. But we also have a lot of investments with all our cell suppliers and vendors. They’re great partners, and they’ve done great development work with us and a lot of the advancements in technologies and chemistry we found 4680, they’re also putting into their cells.
Elon Musk: Yes. I mean a big part of the 4680, Tesla doing internal cells was a hedge against what would happen with our suppliers because for a while they are it was very difficult because every big carmaker put in massive battery orders, and so the price per kilowatt hour of lithium-ion batteries went to crazy numbers, crazy levels.
Vaibhav Taneja: Bonkers.
Elon Musk: Yes, just bonkers. So like, okay, we’ve got to have some hedge here to deal with cost per kilowatt hours of numbers that were double what we anticipated. If we have an internal cell production, then we have that hedge against demand shocks, we have too much demand. That’s really the way to think about it. It’s not like we want to take on a whole bunch of problems just for the hell of it. We did the cell program in order to address the crazy increase in cost per kilowatt hour from our suppliers due to gigantic orders placed by every carmaker on earth.
Martin Viecha: Okay. Thank you. And the last question comes from Ben Kallo from Baird. Ben, go ahead and unmute. Ben, you’re still muted.
Elon Musk: Well, I want to say again, we’d just like to strongly recommend that anyone who is, I guess, thinking about the Tesla stock should really drive FSD 12.3. It really – you can’t – it’s impossible to understand the company if you do not do this.
Martin Viecha: All right. So since Ben is not unmuting. Let’s try Shreyas Patil from Wolfe Research. Final question.
Shreyas Patil: Thanks so much. Just Elon, during the Investor Day last year, you mentioned that auto COGS per unit for the next-gen vehicle would decline by 50% versus the current three and Y. I think that was implying something around $20,000 of COGS. About one-third of that was coming from the on-box manufacturing process. But I’m curious if you see an opportunity that the – some of the other drivers around powertrain cost reduction or material cost savings, would those be largely transferable to some of the new products that you’re now talking about introducing?
Lars Moravy: Yes, sure. I mean, in short, yes, I mean, like the on-box manufacturing method is certainly great and revolutionary, but with it comes some risks because new production lines and not, but all the subsystems we developed, whether it was powertrains, drive units, battery improvements in manufacturing and automation, thermal systems, seating, integration of interior components and reduction of LV controllers, all that’s transferable, and that’s what we’re doing, trying to get it in their products as fast as possible. And so yes, that engineering work, we’re not trying to just throw it away and put a cars and we’re going to take it and utilize it and utilize it to the best advantage of the cars we make and the future cars make.
Shreyas Patil: Okay. Great. And then just on that topic of 4680 cells, I know you mentioned it, you really thought of it more as like a hedge against rising battery costs from other OEMs. But it seems even today, it seems like you would have a cost advantage against some of those other automakers. And I’m wondering, given the rationalizing of your vehicle manufacturing plans that you’re talking about now, if there’s an opportunity to maybe convert the 4680 cells and maybe sell those to other automakers and really generate an additional revenue stream. I’m just curious if you have any thoughts about that.
Elon Musk: Great. What seems to be happening is that the I’m missing something, the orders for batteries from other automakers have declined dramatically. So we’re seeing much more competitive prices for sales from our suppliers, dramatically more competitive than in the past. It is clear that a lot of our suppliers have excess capacity.
Vaibhav Taneja: Yes. In addition to what Elon, this is kind of in addition to what Elon said, about 4680, what 4680 did for us from a supply chain perspective was help us understand the supply chain that’s upstream of our cell suppliers. So a lot of the deals that we had struck for 4680, we can also supply those materials to our partners, help reducing the overall cost back to Tesla. So we’re basically inserting ourselves in the upstream supply chain by doing that. So that’s also been beneficial in reducing the overall pricing in addition to the excess capacity that these suppliers have.
Elon Musk: Yes. No, I mean this is going to wax and wane, obviously. So there’s going to be a boom and bust in battery cell production where production exceeds supply and then supply exceeds production and back and forth kind of like, I don’t know, DRAM or something. But Yes. So it’s like what is true today will not be true in the future, there’s going to be somewhat of a boom and bust cycle here. And then there are additional complications with government incentives like the Inflation Reduction Act, the IRA, Joe [ph] has found like a funny name.
Vaibhav Taneja: Comical name.
Elon Musk: Yes, it is like Irish Republican Army, The Internet Research Agency from Russia.
Vaibhav Taneja: Independent retirement account.
Elon Musk: Yes, exactly. Roth IRA. It’s like Spider-Man situation, which IRA wins. So but it is complicate the incentive structure. So that is there’s the stronger demand for cells that are produced in the U.S. than outside the U.S. But then how long is that the IRA last, I don’t know.
Vaibhav Taneja: Which is why it’s important that we have both internet [ph] cells and vendor cells that hedge against all of this.
Martin Viecha: Okay. Thank you very much. That’s all the time we have today. But at the same time, I would like to make a short announcement. And I wanted to let the investment community know that about a month ago, I met up with Elon and Vaibhav and announced that I’ll be moving on from the world of Investor Relations. I’ll be hanging around for another couple of months or so. So feel free to reach out at any time. But after the seven year sprint, I’m going to be taking a break and spending some good quality time with my family. And I wanted to say that these seven years have been the greatest privilege of my professional life. I’ll never forget the memories from I started literally at the beginning of production hell and just watching the company from the inside to see what it’s become today.
And especially super thankful to the people in this room and dozens of people outside of this room that I’ve worked for over the years. I think the team’s strength and teamwork at Tesla is unlike anything else I’ve seen in my career. Elon, thank you very much for this opportunity that I got back in 2017. Thank you for seeking investor feedback and regularly and debating it with me.
Elon Musk: Yes. Well, I mean the reason I reached out to you was because I thought your analysis of Tesla was the best that I had seen.
Martin Viecha: Thank you.
Elon Musk: So, thank you for helping Tesla to get to where it is today over seven years. It’s been a pleasure working with you.
Martin Viecha: Thank you so much. And yes, thank you for all the thousands of shareholders that we’ve met over the years and walked around factories and loved all the interactions, even the tough ones. And yes, looking forward to the call in the next three months, but I’ll be on the other side, listening in. Thank you very much.
Vaibhav Taneja: Thanks.
