Zachary Kirkhorn: The Austin and Berlin ramp in efficiencies and 4680 will make a substantial amount of progress on that over the course of the year, and that’s within Tesla’s control. We’re doing a lot of work on cost reduction outside of that. And we talked about supply chain costs, expedite logistics, attacking everything. On the raw materials and inflation side, where lithium is the large driver there and this was a meaningful source of cost increase for us, we’ll have to see where lithium prices go. And we’re not fully exposed to lithium prices, but I think in general, is what we’ve seen from our forecast here, cost per car of lithium in 2023 will be higher than 2022. So that’s a headwind that would have to be overcome to return back to those levels. So I don’t think we’ll get there this year but I think we’ll make progress. And we’ll continue to find ways to offset these raw material costs that we don’t have control over. Andrew, is there anything on that?
Andrew Baglino: Yes. Like on the non-cells raw material, we begin to capture benefits of indexes tapering out, but due to the length of various supply chains, it does take time before this is reflected in our financials. And while alumina is down like 20% year-over-year, steel is about 30% down year-over-year, the global non-cells raw materials market continues to be influenced by geopolitical situations in Europe, high production cost due to labor cost increases and energy spikes and disruptions due to natural disasters like typhoon in Korea four months ago, pandemic lockdowns. So we believe that meaningful price corrections will ultimately come but it remains uncertain exactly when. In the meantime, we continue to redesign supply chain to make it more efficient and work with our supplier partners to find more efficiencies, streamline logistics and transportation to produce cars.
Pierre Ferragu: Excellent. Thank you. And I
Martin Viecha: Sorry, do you want to go say something?
Andrew Baglino: I was going to say, we’re also — our fleet is starting to mature, the 3, Y fleet. And we’re gathering a lot of data out of that fleet to understand how we can sort of bring some margin that we didn’t know we had out of the product. So over the course of 2023 on the powertrain side, we’re actually going to go after sort of some materials where we’re paying for more performance than we need, or we have more content than we need, without impacting reliability at all. And that will actually add up to a pretty significant cost reduction on the powertrain side over the course of 2023. So we’re not just sort of relying on supply. We’re also doing design actions to bring cost out.
Elon Musk: Yes. My guess is, if there is — if the recession is a serious one and I think it probably will be, but I hope it isn’t, that would lead to meaningful decreases in almost all of our input costs. So we expect to see deflation in our input costs most likely, which would then lead to, yes, better margins. I’m just guessing here. So, this is — that would be my guess.
Pierre Ferragu: Thank you, so much. So as a quick follow-up, Elon, I was thinking about like FSD, and when you look at like the situation today compared to a year ago, it’s — like the progress has been, like, amazing in the quality of the product, but also its rollout. And so, I was wondering, how much is this like impacting the take rate of FSD today? So do you already see that people are getting more excited by FSD, because they see it around them on 400,000 cars and they see the value of the service already, or is that too early to really see like, to expect like an uptick in the take rate?
Elon Musk: The trend is very strong towards use of FSD. And as you alluded to, the — with each incremental improvement, the enthusiasm obviously increases. And — so, I think something that still a lot of people out there don’t quite appreciate is that Tesla — I would say, like, Tesla is as much as a software company as a hardware company, but Tesla is really one of the world’s leading AI companies. This is kind of a big deal with AI on the software side and on the hardware side. With the Hardware 3 inference computer, still the most efficient inference computer in the world despite being, at this point, five years old from the design point. And with Hardware 4 coming and then Hardware 5 beyond that, where there are significant leaps.
And the Dojo computer, we expect to be using that operationally at Tesla later this year. So — and we’re seeing just a lot of world-class AI talent join the company. There’s also the long-term potential of Optimus where we’re able to use our expertise in electric motors and power electronics, batteries and advanced manufacturing to be able to make a humanoid robot that is actually useful and can be made at high volume with exceptional capabilities, because of the — or robot AI that, where we take the — because the car is like a robot on four wheels and Optimus is a robot on legs. But the — as we get closer and closer to solving real-world AI, and we don’t see anyone even close to us in achieving this, the value — I think, you appreciate this and a few others do, but most don’t know what I’m talking about.
And so — but it’s — this is the thing that has order of magnitude potential market cap improvement for Tesla.
Martin Viecha: Thank you. And the next question comes from Alex Potter from Piper Sandler.
Alex Potter: Can you hear me, guys?
Martin Viecha: Yes.
Zachary Kirkhorn: Yes
Alex Potter: Okay, great. So a quick one on FSD. This, I guess, for Zach. Obviously, you unlocked some deferred revenue in the quarter that will translate presumably into higher margins on every incremental sale going forward so long as people opt in for FSD. But was wondering if you’re able to disclose the percentage of the $15,000 price that you’re not going to be able to recognize as revenue upfront rather than deferred?
Zachary Kirkhorn: Yes. I mean, the way that we’ve structured this is a full self-driving package has two components. There’s enhanced Autopilot, the price of which is listed on the website. We fully recognize that. Then there’s an incremental, which is for the additional features of full self-driving offers and we’ve released a portion of that. And then there’s a minority of the total package that’s remaining that will be released over time as software updates are there. And in our shareholder letter, in addition to disclosing the dollar amount of the deferred revenue release, we also included in there the dollar value of the balance of unreleased deferred revenue that will be released over time with future software updates.
