William Stein: Yes. It sounds like the 1.8 million units you expect this year is supply, not demand limited supply, it sounds like by the lithium batteries. If you were to become demand limited, can you talk to us about your propensity to use price and your relatively high industry margins to grow units and share?
Zachary Kirkhorn: Yes. To be clear, the 1.8 million is not cell supply limited. And I mean, we did address that number earlier in the call if you want to answer.
Elon Musk: Yes. It’s roughly — cell supply is roughly matched with that. And this 1.8 million cars, if we get lucky, it could be more. And then the rest would go into stationary storage, the Powerwall and Megapack. So, yes, so true.
Martin Viecha: Okay. Let’s have the final question from Adam Jonas.
Adam Jonas: Hi. Elon, first question is, is it time for Tesla to significantly expand the captive finco? I mean, you only have like $4.5 billion of receivables. It’s basically nothing compared to other big auto companies. And then I have a follow-up.
Elon Musk: Zach maybe is best to answer that.
Zachary Kirkhorn: Yes. I mean, the way that we’ve been using captive financing so far is to plug what we believe to be gaps in the market of existing third-party products. And so we have a couple of offerings in Europe. We do loans for our energy business, retail energy business here in the US. We do leasing and we do a small amount of US loans that are very targeted. And so we’re using captives to support market caps, as I mentioned. So basically, it’s a vehicle to support vehicle sales, make sure customers have access. I do think there’s opportunity here to continue to grow this. We are growing it slowly here. It is a consumer of cash, so we’re being cautious on how we do that. But the plumbing is in place to do a lot more here. And I think we’ll have to see how things unfold over the course of the year and make decisions real time as to how much we ramp it up versus ramp it back.
Elon Musk: I think if we see a severe recession this year, which like I said, hopefully, we don’t, in severe recessions, cash is king big time, because it’s in such short supply. So we want to be cautious about using cash for loans and that sort of thing for cars. I feel we’re in a very strong position to get through a recession, because we really don’t have any debt. And we’ve got over $20 billion of cash, which is great. The cash is earning a ridiculous return, a good return. So it’s like nontrivial. And the interest rate actually in the $20 billion is earning like quite a good amount. And I’ve made this point on Twitter a few times. I’m sure a lot of people on this call understand the fact — the basic value of a security is a function of the risk-free rate or we’ll see how risk-free it really is but the T-bill rate.
So if you’ve got — I think the — I recall correctly, the S&P 500 has a long-term rate of return of roughly 6%. And so I think that needs to be very cautious about having Fed rates that potentially exceeds 6%. Like, if we see deflation, and I think we are seeing deflation then you would add the deflation number to the ‘risk-free rate’ from the Fed. And as that starts to exceed 6%, now you’re starting to exceed the long-term return of the S&P 500 and starts to become questionable as to why don’t just put your money in a savings account essentially instead of in the S&P 500, if the S&P 500 is variable and the bank interest rate is not? This is — so basically, the Fed is the risk of crushing the value of all equities, which is quite a serious, danger.
Adam Jonas: Thanks Elon. And just a follow-up, I don’t want to steal thunder from March 1st and in Austin, but how close are we to that step change improvement in BoM cost where you could sell an EV for under $25,000 or $30,000 and actually generate a profit, that kind of real moving assembly line moment in manufacturing? Again, I don’t want to steal the thunder but just if you wanted to kind of wrap-up with thoughts there that would be helpful. Thanks Elon.
Elon Musk: I mean, I’d love to answer — I’ll probably be asking the same question, but we would be jumping the gun on future announcements.
Martin Viecha: Fantastic. Thank you very much, everyone, for all your good questions. And we will see you again in three months’ time.
Elon Musk: Thank you.
Martin Viecha: Thank you. Bye-bye.
