Tesla Battery Day

Hello everyone, I want to say that this is definitely a new approach. We have the Tesla drive-in basically. It's good to see everyone. It's a little difficult to read the room. With everyone in cars, but it's the only way. I could do it, so I hope it's cool and I hope you can hear me, can you hear me? Okay, great, okay, thanks for coming. I think it's been an incredible year. I would like to thank you for your support, through, you know, tough times, good times, it's been great, I really appreciate everyone who put their heart and money into Tesla and, you know, I think it's worked out pretty well, this has been a good year and I think there are many good years ahead.

Come on, so I'll go over the kind of shareholder presentation, I think pretty quickly because the real kind of main event here is

battery

day and I'm really going over a summary of what happened. last year or so, I think from, you know, in terms of our ability to create a factory, uh, you know, big congratulations to the

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shanghai team for being able to literally go from a pile of dirt to a production in volume in 15 months it's like damn yeah so, and I think something that's really worth mentioning here is that Tesla is the only foreign manufacturer that has 100 of its own factories in China, so this is often misunderstood. well or not appreciated, but having the only 100 foreign owned, you know, foreign factory in China is a big deal, and it's paying huge dividends here, so we really wouldn't have the results that we've had this year without the great efforts from Tesla China. team, so I'm very grateful for that and we'll see the Shanghai factory continue to scale quite a bit from where it is now.

I think we could really expect it to eventually become a factory that produces over a million vehicles. One year, yeah, that's great, so let's see, last year we also reached model Y production volume and this was the smoothest launch we've ever had, so I think we're definitely getting better at new vehicle launches. and building factories and scaling production, as you have heard me say before, the most difficult thing is to scale production, especially with new technology, it is incredibly difficult, making a prototype is relatively easy and if I think about what Tesla's real achievement is in in car company terms, it's like it wasn't making exciting prototypes, it was that Tesla was really the first company in about a century in the US, the first American company in the US to reach volume production and be sustainably profitable.

The crazy thing is this hasn't really happened in a hundred years that's the really super hard part um and now we have four vehicles in volume production s3 xy so that's also the hardest joke uh I think maybe some Once there was a It's a very difficult joke to make, so we also introduced the lowest cost solar in the US, it's only a dollar forty-nine or what, and we really simplified the whole value chain, so we reduced sales and advertising, it was eliminated. of a lot of unnecessary costs and we really just rely on the fact that it is simply the most efficient and lowest cost solar system in the US that provides both the retrofit and the solar glass roof, which I think is a really excellent product.

It's a difficult product to make work, it will be an important product line in the future and we also had four consecutive quarters of gap profitability, which was very difficult, yes, and certainly a testament to the hard work of the people at Tesla . I want to do this in extremely difficult times against a wide range of adverse circumstances. It was tremendously difficult, but we did it and I think the future looks very bright from an annual return kind of perspective. From my point of view, to achieve something good financially you really need economies of scale and ideally you need the best technology and I think we had the best technology for a while, but now we are also achieving economies of scale.

So, and we're also rapidly improving autonomy, which is a huge added value for every car, so you know, I think Tesla's value will be total just on the vehicle side, the total vehicles produced multiplied by the value of autonomy. A way to think about the future value of Tesla. We also have consistent free cash flow generation. This is really important for growth. And a key element here is reducing the time from when a car is ordered to when it is built and delivered. So for a company that is growing rapidly, it is extremely important to tighten the supply chain and, from the time the parts arrive, put them on a car very quickly and deliver the car very quickly to the customer, and if you can do that within.

Depending on the type of your accounts payable schedule, the faster it grows, the more cash you will have or, conversely, if you can't do it within your accounts payable schedule, the faster it grows, the less money you will have, which is obviously bad. um, it's for a capital intensive situation, so just adjusting and getting the parts moving very quickly, going to the factory, putting it in a car, getting it to a customer, makes a big difference in generating flow. of cash and I mean that's why it's extremely important to have a factory. On each continent because if you don't have at least one factory on the continent it is impossible to achieve it, so having a factory in China that can serve China and then, you know, soon, many, many, many other countries in the region.

It's going to be key for us to tighten that kind of total cash flow chain and get it essentially the faster we generate more cash, this is really important, which is why it's also important to have a complete Berlin gig because then we will have a factory in china factory factory in the USA and soon a second factory in the USA in Austin um and a factory in Europe um and and I mean, even if you were for the giga texas in Austin, even if we had the exact same classes in California, it would still be advantageous to do it there because it's about two-thirds of the way across the US, so in terms of delivering cars to the central US and the east coast, it's much faster, costs less, um and um, basically. it improves our economy, so I think this is also something that maybe isn't fully appreciated about how important it is to have a factory at least on the continent or reasonably close to where the end customers are to be able to fine-tune that whole chain, uh, industry performance. uh we have um you know while the rest of the industry is down uh Tesla is up um I think this speaks to thank you um so I would like to thank all the customers for taking a chance on Tesla and purchasing our product and I really hope you're enjoying it, this is really, you know, our sales, like I was saying, really grow by word of mouth, so this is really, I think it's very pure, you know, it's very pure in the sense that it is how it is growing on the basis of existing owners recommending it to others and new customers.

This is a really good way to grow and then in 2019 we had 50% growth and I think we will do quite well in 2020. Probably 30 to 40 percent growth despite a lot of very difficult circumstances. I mean, there are so many pandemic wildfires that it's like a lot of difficult production problems. But thanks to the hard work of the Taser team and with many innovative approaches to overcome the problems, we can still see significant growth in one of the most difficult years, in fact, I say, probably the most difficult year of Tesla's existence, so We also published our expanded impact report.

Yes, Tesla, we tried. It is very difficult to do the right thing. If what I think is not happening is simply because maybe we made a mistake or we are aware of it, but we always try to do the right thing as best we can. capacity and then we publish the expanded impact report to show you that you know just kind of a self-examination of well, what are we doing right, what are we doing wrong, what can we do better in the future, you know we're definitely we're trying to achieve the greatest benefit and so if we occasionally make a mistake we work quickly to fix it and do the right thing, so it's worth considering what the average cycle emissions are in the US and how much.

A Tesla is better than an electric car than any other, than any type of gasoline car, and what we will talk about on

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day is also how much the grids are being greened around the world and, in fact, especially in the US. It's actually a lot faster than I think that people are realizing that America is moving towards sustainable energy and as we move more and more towards sustainable energy, you effectively end up building solar factories and the solar-powered car factories themselves. um over time you will or with sustainable energy, over time you will even mine with sustainable energy and eventually it will get to effective zero emissions so that's where things will end up so we also have safety at the center.

From our design, Tesla cars are the safest cars ever designed, we have the lowest probability of injury of any car ever tested by the US government and that's just passive safety when you add active safety to that, it's Even better. Well, you know, it's really whether you know if security is important to you, which you obviously know it is. The safest car you can drive is a Tesla, so you know, I think sometimes some people aren't aware of this, but really safety is paramount, it's actually the number one design goal when we build Tesla safety. Our factories are also becoming safer and if you look at the rate of accidents per vehicle in total, it is dramatically better than in the past.

It is already better than the industry average and we are confident that we can achieve the best in the automotive industry. Autopilot functionality continues to improve and you can see it in the safety report we publish every quarter. It's getting better and better. The American average for collisions is, you know, about 2.1 per million miles and with Autopilot on it's 0.3. I mean, this is a profound difference, really huge, and it will get even better, so we're sure over time. We can get the probability of an accident, especially the probability of an injury, ten times better than the industry average, orders of magnitude better, so a lot of lives are saved and a lot of injuries are avoided, so it's a you know that it's a big priority for us um and um you know, the autopilot in front uh, I think it's a little difficult for people to judge the progress of the autopilot um like I'm driving, as a matter of course, I've always done this I drive the latest generation autopilot alpha version, so I have an idea of ​​what's going on, um and um, you know, a couple of years ago we were stuck in a local maximum, so we were improving, but as the las Improvements began to slow down and simply did not get to where they needed to be.

We were much more scared of getting stuck in a local maximum, so we had to do a fundamental rewrite of the entire autopilot software stack and all the tagging software as well, so now we're tagging in 3D video, so that this is hugely different from the above, where we were essentially tagging a bunch of individual images from all eight cameras and they would be tagged at different times by different people and some of the tags you literally can't tell what it is you're tagging, so basically in some cases it made it impossible to tag them and the tags were very buggy now with our new tagging tools uh we tag on video so we actually tag entire video segments and the system so you basically get immersive video , something to tag and with the surround video and over time, so now it's taking all the Amazon cameras simultaneously and looking. how the images change over time and how to label that and then the sophistication of the neural networks in the car and the overall logic in the car has improved dramatically.

I think we'll hopefully release a private autopilot beta of the full self-driving version. on autopilot in I think about a month and then people will really understand the magnitude of the change, it's profound, so yeah, anyway, you'll see it's like a big sea change, but because we had to rewrite all the labeling software , just the entire code base, it took us quite a long time, and the kind of something new, cool, like 4d in the sense that it's three dimensions plus time, it just took. It's going to take us a while to rewrite everything, um, and then you know you'll see what it's going to be like, it's amazing, um, yeah, it's obviously going to work, um, yaum, the faster you go, if a factory that moves at, let's say, twice the speed of another factory is equivalent to Basically, two, two factories and the company that will be successful is the company that with one factory can achieve the That other companies need two, three or four factories to make, so this is what we are trying to do here is how?

We can achieve with one factory what would normally take five or even ten factories to achieve and the vertical integration with the machine design teams at Groman and High Bar and others allows us to really achieve that because we don't have all of these boundary conditions between one piece of equipment and another, we can design the entire machine to be one machine and eliminate all these unnecessary steps. Yeah, I mean, basically, Tesla aspires to be the best in manufacturing of any company in the world. It's what's actually most important in the long term, I think you know, just from a company point of view and basically from the point of view of achieving sustainability as quickly as possible, but I think also for competitiveness at long term, over time, all automotive companies will have range of electric cars um, you know, eventually all companies will have autonomy, I think, but not all companies will be great at manufacturing. uh, Tesla will be absolutely ahead of anyone else in manufacturing, that's our goal.

Manufacturing is hard and hard problems are fun to solve. Well, now let's talk about training in a typical cell factory. Training represents 25% of the investment and what training is is loading and unloading cells and verifying the quality of the cell. It turns out that we have loaded and unloaded billions and billions of cells. in our vehicle, so we know a thing or two about the typical training setup: you charge and discharge each cell individually in our car, we charge thousands of cells at a time and take our main and our power electronics leveraging battery management electric wall vehicle batteries. systems and others to dramatically improve training equipment, uh, profitability and density, 86 reduction in training investment, 75 reduction in footprint, so you have to take this with a grain of salt, so essentially what this translates to according to what we know today is about a 75, uh, reduction. in the investment per kilowatt hour uh oh concert what time is it is basically four times better than the current state of the art as far as we know uh and uh I think there's probably room for improvement even beyond that definitely uh definitely yeah um so uh we From a volume standpoint, we can get what's there in a smaller form factor than Giga Nevada.

We were able to get many times the output of the cell, so you can see we can basically get a terawatt hour in l. in less space than it took to produce one gigawatt hour, you know, 150 gigawatt hours, so this is pretty profound, you know, it's like I didn't actually think that this was possible, several years ago, that we could actually get there to terawatts at our scale in less time. less space than we currently imagine to do 150 gigawatt hours yeah, simpler accelerates the terawatt hour scale and that's what we need to do to accelerate our mission um and you know, like Elon said, we're going to try to even improve this as we uh push toward our goals, which are yeah, so this is just for, this is just talking about Tesla's internal cell production, as I wrote on Twitter before, we will continue to use our cell suppliers, Panasonic and LG and Catl, and so this.

That's an additional 100 gigawatt hours to what we buy from suppliers and, yes, essentially, this reduces our weighted average cost of a cell because doing so allows us to make many more cars and much more. stationary storage um and um and then in the long term we hope to gain on the order of 3,000 gigawatt hours or three terawatt hours per year um I think we can, we think we have a good chance of actually achieving this before 2030, but I'm very confident in that we'll be able to do it by 2030. When we look at the size of that factory on the previous page, it really shows how enabling all of these advances are to achieve a goal of three terawatt hours by 2030.

And not just all that innovation in manufacturing? Is it fantastic to allow for scale? It's also an additional $18 per kilowatt hour reduction at the battery pack level, but wait, there's more, but wait, there's more, yeah, so we have a manufacturing system, we have a cell design, what are they? the active materials that we are going to put into the design of that cell let's talk about the anode first let's talk about silicon why silicon is amazing it's amazing because it's the most abundant element in the earth's crust after oxygen, which means it's everywhere Where there is sand, yes, there is sand.

Silicon dioxide, yes, and it turns out that it stores nine times more lithium than graphite, which is the typical anode material in today's lithium-ion batteries, so why doesn't everyone use it? The main reason is that the challenge with silicon is that it expands 4 times when fully charged. with lithium and basically all that expansion stress in the particle, the particles start to crack, they start to become electrically insulated, you lose capacity, the energy retention of the battery starts to fade and you also get stuck with a passivation layer that has to continue to reform as the particles expand.

Yes, basically with silicon the cookie crumbles and becomes sticky, that's basically what happens. Good analogy, yeah, um, and the current approaches to solving this that exist, I mean, we have silicon in the cars that you all are involved in right now, expensive highly engineered materials are involved, uh. In the scheme of things now, they're still great and they allow some of the benefits of silicon, they just don't allow all of them and they're not scalable enough and you can see some of the things that you might be able to see. I have heard of sio silicon with carbon or silicon nanowires.

You know that's the space right now. What we are proposing is a radical change in capacity and a radical change in costs, and it really is going to raw metallurgical silicon. itself you don't design the base metal you just start with that and design for it to expand the way you think about the particle in the electrode design and how you encode it yeah I'm not sure if you saw those basically a dollar a Kilowatt hours, basically, if you use plain silicon, it's dramatically less than the silicon that's currently used in batteries that are made today, and you can use a lot more, the anode would cost, yeah, with this silicon and the anode. it's a dollar and 20 cents a kilowatt hour yeah um and how it works start with raw metallurgical silicon stabilize the surface with an elastic ion conducting polymer coating that's applied using a very scalable approach no no no like chemical vapor deposition not high engineering capac solutions and then integrated into the electrode through a robust network formed from a highly elastic binder and in the end, by harnessing this silicon to its potential, we can increase the autonomy of our vehicles by an additional 20, just this it gets better, yes, it gets cheaper. and longer range, yes, and when we take that anode cost reduction, we're looking at another five percent dollar per kilowatt hour reduction at the battery pack level and there's more, let's talk about cathodes, what is a battery cathode?

Cathodes are like bookshelves where The metal, you know, nickel, cobalt, manganese or aluminum is like the shelf and lithium is the book, and really what distinguishes these different metals is how many lithium books can fit on the shelves and how sturdy the shelves are. Cobalt is a Sorry, I'm actually going to say that it's hard to figure out exactly what the right analogy is to explain the cathode and the anode, but a bookshelf is probably pretty good, in the sense that you need, you need a stable. structure to contain the islands, so you want a structure that doesn't fall apart or get sticky or basically holds its shape at both the cathode and the anode as you move these ions back and forth, you need to retain its structure, uh, like this that if you don't retain a structure, then you lose the cycle life and the battery capacity drops very quickly, absolutely, um, yeah, I totally agree and I think people are always talking about, oh, what's the cathode going to be? ? ncaa or whatever you know, what you have to consider is fundamentally what the nickel and the metals are capable of and that's what we have on the chart here dollar per kilowatt hour cathode of just the metal using just lme, you know, London Metal Exchange prices, um versus the energy density of just the cathode and you can see that nickel is the cheapest and the highest energy density and that's why increasing nickel is one of our goals. and they're really all into energy in the battery industry, uh, but one of the reasons cobalt has even used it all up is because it's a very stable shelf and the challenge of moving to pure nickel is stabilizing that shelf. just with nickel and that's what we've been working on with our development of high nickel cathodes that don't have cobalt taking advantage of novel coatings and novel coatings and dopants we can get a $15 reduction in cathodes per kilowatt hour yeah it's a big deal, but it's not just about nickel, yeah right, so to scale, we really need to make sure that we're not limited by the total availability of nickel.

In fact, I spoke to the CEOs of the largest mining companies in the world and I said, please produce more nickel, it's very important, so I think they are going to produce more nickel, but there is also. You know, I think we need to have kind of a three-tier approach to batteries, so starting with iron, which is like a mid-range, and then nickel, manganese, like kind of a medium plus, uh, intermediate, and then high. nickel content for a long time. range applications like the cyber truck and the semi um there's something like a semi truck it's extremely important to have a high energy density to get long range so um and just to give the iron a little bit more time like the uh although you know, if you look at the white house per kilogram at the iron cathode level, it looks like nickels are twice as good, but when you consider completely at the package level, everything else is taken into account, the Nickel was maybe 50 or 60 percent better than iron, so iron isn't a little bit better than it seems when you look at it at the package level, all things considered, it's not as good as nickel and it goes as 50 to 60. better, but it's still pretty good, so you know, it's good for stationary storage and for mid-range applications, where power density is not paramount and then, like I said, for intermediate, it's kind of nickel manganese and is relatively simple. make a cathode that is two-thirds nickel and one-third manganese, which would then allow us to make 50 more volumes of cells with the same amount of nickel and with very little energy, enough to still have what you want. using 100 nickel for something like a truck, but it's not really a big sacrifice, yeah, and you know, beyond the metals, because a lot of people spend time talking about the metals, actually, the cathode process itself is a great goal.

The dollar per kilowatt hour is just about transferring it into its final form, so we thought of it as a big goal and decided to tackle it. Here is an effective view of the traditional cathode process if you start on the left and have the metal. from the mine, the first thing that happens is that the metal in the mine is transformed into an intermediate substance called metal sulfate because that's what chemists wanted a long time ago and then, and then, when you're making the cathode. you have to take this middle thing called metal sulfate, add chemicals, add a bunch of water, a bunch of stuff happens in the middle and in the end you get that little bit of cathode and a bunch of wastewater and byproducts, yeah, it's incredibly complicated . if you look at the total like you're like you know it's a little world trip of uh I'm a nickel atom what happens to me and it's like it's crazy like you're going around the world three times. there's like the moral equivalent of digging in the ditch filling up the ditch and digging the ditch again is totally crazy basically um and these things just grew like they were legacy things which is how it was done before and then they connected the dots but they really didn't.

They thought about the whole thing from a first principle point of view, saying how do we get from the nickel or in the ground to the finished nickel product for the battery, so we looked at the whole value chain and said how can we do this? simplest possible and that is what we are proposing here with our process, as you can see, a lot happens hereless, we get rid of the final benefit of intermediate metallic water. The product cathode recirculates the water, there is no wastewater at all and when the summaries summarize all that, it is 66% reduction in capital investment, a 76% reduction in process cost and zero wastewater, a very solution. more scalable, yes, and then when you think about the fact that now we're actually just directly consuming the nickel powder from the raw metal, which dramatically simplifies the metal refining part of the whole process, so we can eliminate billions in intermediate production of nickel for batteries.

It's not necessary at all, yes, and we can also use the same process that we showed. on the previous page to directly consume the metal dust that comes out of recycled electric vehicles and grid storage batteries, so this process allows for simpler extraction and recycling and now that we have this process, we are obviously going to start to build our own cathode. facility in North America and taking advantage of all the North American resources that exist for nickel and lithium and by simply doing that, by simply localizing our cathode supply chain and production, we can reduce the miles traveled by all the materials that end up on the cathode in 80, which is huge.

As for the cost, yes, I want to make it clear that cathode production would be part of our Tesla cell production plant, so know that you basically know that the raw materials come from the mine and the raw materials in the results of the mine battery and, in that sense, the way the lithium ends up in the cell is through the cathode, so obviously we should also do an on-site lithium conversion, which is what we will do using a new process in which we are going to be pioneers and which is a sulfate-free process. intermediate 33 reduction in the cost of lithium 100 electrical installation located together with the cathode plant, yes, so it is important to note that there is a large amount of lithium in the earth, so lithium is not like oil, there is a large amount practically everywhere, so in fact there is enough lithium in the United States to convert the entire US fleet to electric, like all cars in the United States.

All vehicles in the United States can be converted to electric using only the lithium that is available in the United States. I found out today that yes, what? We already know it exists, people haven't really even been looking, yeah, people haven't tried it because it's widely available, so, but it's important to say, okay, what's the smartest way to take the mineral and extract lithium? And doing it in an environmentally friendly way, and we actually found that, looking at it again, it's kind of a first principles physics point of view, rather than just the way it's always been done, we found that , actually, we can use table salt, sodium chloride. uh basically extracting the lithium from the mineral um and uh no one has done this before as far as we know no one has done this um and it's like you know all the elements are reusable it's a very sustainable way to get lithium and we We actually got rights to a lithium clay deposit in Nevada, over 10,000 acres, over 10,000 acres and so the nature of mining is also very sensitive to the environment as we take out a piece of dirt from the ground or we remove the lithium and then place the piece of dirt where it was so that it looks more or less like.

Same as before and it won't look terrible and yes, it will be nice, so just mix clay with salt, put it in water. The salt comes out with the lithium ready. Yeah, it's pretty crazy, so we're really excited about this and the rest. There really is enough lithium in Nevada alone to electrify the entire US fleet. Yes, that's true. In reality, just what there is in Nevada is basically as much lithium on Earth. It's crazy, it's one of the most common elements on the planet. And eventually, as we said in the beginning, when we get to this steady state of 20 terawatt hours per year of production, we will transfer the entire non-renewable fleet of power plants for home heating and industrial heating and vehicles to electric and at that point we will have a incredible resource. in those batteries to recycle to make new batteries so we don't need to do any more mining at that point and you can see why the difference in the value of the material coming back from the vehicle versus the ground We would always go to the vehicle and today we recycle 100 of the batteries in our vehicles and in fact we will begin our large-scale recycling pilot production at gigafactory reno next quarter to continue developing this process as our recycling returns grow, yes.

I mean, to date it's been done by third parties, but we think we can recycle batteries more effectively, especially because you know we know our batteries. We are manufacturing the same battery that we are recycling, so while a third party. -Party recyclers have to consider batteries of all types, yes, and just think about what this really means: the recycling resource is always delayed 10 years or more because batteries last a long time, but eventually that's how they will be used all resources. available and that's why we're investing in this recycling facility in Nevada, yes, long term new batteries will come from old batteries, once the fleet reaches steady state, okay, then we talk about cathode scaling and recycling all the benefits that you just saw, to this benefit is added a reduction of 12 dollars per kilowatt hour at the battery pack level, almost at the level of our cost target, but there is one more section, remove it, so There is an architecture that we were wanting. making

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for a long time uh and we finally figured it out um and I think it's the way all electric cars will be made in the future uh it's the right way to do things right away um that's right it starts with having a casting of a single piece or a single piece casting for the front mate and the rear mate and to do this we commissioned the largest casting machine ever made and it is currently running right over the road at our Fremont plant we have he's pretty sweet um doing the whole uh currently making the entire rear section of the car out of a single piece of high pressure die cast aluminum and to do this we actually had to develop our own alloy because we wanted a high strength casting alloy. that did not require coatings or heat treatment.

This is a big problem for castings, especially with a large piece, if you heat it afterward, it tends to warp it like that. potato chip thing, so it's very difficult to keep a large casting to have its shape, so to achieve this there was no alloy that could do this, so we developed our own alloy, a special aloe aluminum that has high strength without heat. treats and is very moldable, so it is a great achievement for our materials team. In fact, in general, we have a lot of advanced materials for Tesla, new alloys and materials that have never existed before, so, then, you're basically we make the front and rear of the car one piece, and then that connects with what we call the structural battery, where the battery for the first time will have dual use.

Both batteries will have use as a power device and as a structure, this is absolutely the way things were done in the early days of airplanes, they carried the fuel tanks as cargo, so the fuel tanks in They were actually quite difficult to transport, they were basically worse than cargo. I had to bolt them on, it was really hard, and then someone said, Hey, what if we just did the wing tanks? What would happen if we simply made the fuel tank shaped like a wing? So on all modern airplanes, your wing fuel tank is just a wing shaped fuel tank this is absolutely the way to do it um and then the fuel tank serves as a dual structure um and it's no longer cargo, It's critical to the structure of the aircraft, this was a huge breakthrough that we're doing.

The same thing for cars, so this is actually quite profound. Effectively, the non-cell part of the battery has negative mass, so we save so much mass in the rest of the vehicle that we save more mass in the rest of the vehicle than the non-cell. cell portion of the battery, so it's like this, how do you actually minimize the mass of a battery? Making it negative make the non-cell part of the battery of the battery pack negative um so um it also allows us to pack the cells more densely because we don't have an intermediate structure in the battery pack, so instead of having these supports, stabilizers, stringers and structural elements in the battery, now we have a lot more space in the battery because the package itself is structural and what we do is essentially um.

As we like, instead of just having a filler that is flame retardant, which is currently what is found in all three battery packs, we have a filler that is a structural adhesive and flame retardant, so it glues the cells together. effectively. to the top and bottom sheet and this allows you to do a cut transfer between the top and bottom sheet like if you had a formula one boat or a racing boat and you had carbon fiber front sheets and let's say an aluminum honeycomb between them . This gives you incredible rigidity and is really how anything super fast works.

You basically create a honeycomb sandwich with two front sheets. This is even better than what airplanes do because airplanes don't do it. This, they can't do this because the fuel is liquid, so in our case the batteries are solid, so we can use the steel casing of the battery to transfer the cutting of the upper and lower front blade, which makes it makes it an incredibly rigid piece. structure even more rigid than a normal car, yes, in fact, if this was like a convertible, uh, that didn't have a top structure, it would be more rigid, so that converter would be more rigid than a normal car, so this is really They have really important, so they improve the mass efficiency of the battery, and then those castings are also very important because you want to transfer the charge to the structural battery pack in a continuous and very smooth way, so as not to place arbitrary point loads. the battery um, so you have to want to separate the charge from the front and the back towards the structural battery um, it also allows us to use uh to move the cells closer to the center of the car um, because we don't have the top one , we have those types of supports and so on, so the volumetric efficiency of the structural package is much better than a non-structural package and we actually bring the cells closer together. to the center um and uh because they are closer to the center uh it reduces the probability of a side impact uh potentially contacting the cells because they have to go in any type of side impact has to go further to be able to reach the cells, they also prove what is called the polar moment of inertia, which is you can think of when there's an ice skater with their arms out or with their arms in, you spin faster, so if you can move things closer to the center.

You reduce the inertia problem and that means the car can handle better, it just feels better, you don't know why, but it just feels more agile, so it's really cool, this is really important, like I said, 10 reduction of mass in the body of the car has a range of 14 times, 370 less parts, so I really think that in the long term and any car that does not adopt this architecture will not be competitive and is not only at the product level a better product, but in the factory is a huge simplification, you saw the elimination of parts, you know, they are casting machines, it is the structural battery pack, so we are seeing a reduction of more than 50 in the investment per gigawatt hour, a reduction of 35 in the space and we will continue to improve it as we make the vehicle factory of the future, yes, there are also important improvements on all fronts, from the cell to the vehicle, and in addition to the improvements we just said about allowing additional range and improving the structural performance of the vehicle, it's worth another seven percent reduction of dollars per kilowatt hour at the battery pack level, bringing our total reductions now to $56 per kilowatt, yeah, okay, so stacking them up, we're not talking just of cost or scope, we have to consider everything.

In the facets, to increase range, we are unlocking an increase of up to 54 in range for our vehicles and energy density for our energy products, a reduction of 56 in dollars per kilowatt hour at the battery pack level and a reduction of of 69 in investment per gigawatt hour, which is thekind of a 50 x 50 long term, but it looks like a lot of the gains in the battery cost curve that you're seeing today really make some of these storage opportunities a lot more feasible in the next five years, so which I guess the first part of the question is whether your calculation by learning and improving these things changes in that 50 50 combination or is there a function where the storage becomes larger and then the second part of the question with all these big visions of who will be with tesla from a From a corporate perspective, accomplishing these things obviously Tesla can't do it alone, but when you look at some of the traditional auto industry or energy, etc., I don't see many other Teslas.

Well, actually, there are many companies in China that I can. I think we're doing a great job with electric vehicles and also with stationary storage. Although we don't see much of it in the United States yet, I think we probably will in the future. Don't know. I mean, obviously, we're doing everything. We can encourage other companies to move to sustainable transport and also manufacture stationary storage batteries. You know, we opened up and made our patents freely available. You know, we really tried to tell these companies. Hey, you really need to do it. Do this or you won't exist in the future uh, but they don't believe it, you know, I mean, we've talked until we're blue in the face, what are we supposed to do? um, but we really are.

We are hopeful that other companies will also do what we are doing and that will make a sustainable future come sooner from a fundamental market size perspective, like we did the first work from scratch to show the market size in terawatts. hours and it's about 50 50. 10 terawatt hours for transportation 10 terawatt hours for the grid um and part of that is due to the batteries on the grid because when you're building a power plant you're making a big investment um our 25 years the assets are larger, you know, if they were, if the grid batteries were 10 years, the grid market would be larger, but because it's a longer-lived asset, they're about the same size thinking about the long term, are there other segments that this new battery will be able to disrupt or electrify beyond the initial model 2 or the cheapest sedan, like a boring company ship, Luke Plane, where are you, geez, are you there?

What's happening here? Okay, great, it's like it's like ventriloquism. we just take the sound out of the speaker, we can't know where it comes from, yes some hand, or model 2 is so important because it reduces the transportation cost, that's really the disruption or should we get height. that this new cost curve opens up different categories of vehicles, like a high passenger density bus, a boat, a boat, an airplane, well, I mean, there are batteries in limited production right now that are over 400 uh in power per kilogram, which I think is the amount you need. for decent range, medium range, uh, airplane, um and I think over time our batteries will start to get closer to the 400 watts per kilogram range as well, so, yeah, I mean, I think over time we'll see all modes of transportation uh with the ironic exception of the transition of rockets to sustainability uh or to electricity basically um on the rocket front uh what we're planning to do is uh like about eighty percent of the starship is oxygen it's liquid oxygen um and uh we're actually already racing to install a power line so we can use wind energy to create liquid oxygen, so we're letting you know some decent sustainability progress on the rocket front, but there's just no way to have an electric rocket and it is important for the future of life and awareness that we become a multiplanetary species so we must continue to do it hi elon hi josh phillips here retail investor I have a question regarding the lithium and lithium industries nickel and the likely price increases and shortages of high-quality materials in the EV industry We are likely to see if they do not act quickly to address future supply.

Tesla has clearly taken the right steps that are necessary, but there is a real concern that potential supply issues and price spikes will create a drag on the rest of the industry and therefore a drag on global adoption of eevee, what advice would you give to the electric vehicle and mining industries to quickly resolve these looming obstacles because for a sustainable energy future the spice must flow, thank you, yes indeed the spice must flow, the new spice, huh, I don't know? I think you know, I'm not sure, I guess we can try to basically overdo the cell production and maybe supply cells to others, but we do see the fundamental fundamental constraint as total cell production, that's why we're. putting so much effort into making sales um and reinventing uh trying to reinvent every aspect of cell production from uh extracting the mineral to a complete battery pack um because it's the fundamental constraint, no, we're not going to get into the cell business. because uh, you know, just for the fun of it, it's because it's the fundamental constraint, it's what's the limiting factor for rapid growth, but we could certainly try to overdo it on cell production and maybe sell sales to others, We're going full speed though, so it's not like we're holding on.

It comes back, but I think it's just making really efficient cars and you know they have a lower drag coefficient, low load resistance, rolling resistance, efficient powertrains, I mean that's what we've done to produce phosphate from iron, still. it has a good range, so iron prices face high space, lower energy density, a solution, but, you know, while there are some limitations on the total amount of nickel produced each year, there really is no limit for iron, there is so much iron it's ridiculous. So you can actually increase iron phosphate, you know, from raw materials faster than nickel, but yeah, and just to point out that when we were going over this presentation, we intentionally separated all the different aspects of the benefits of the battery.

Structural is applied to an iron-based cathode in the same way as it is applied to a nickel-based cathode, so you get longer range iron-based vehicles and also the benefit of silicon can be applied to vehicles iron based, so that's what we can do. There is a lot to extend the range of an iron-based vehicle, so that is a key part of the roadmap going forward and then I invited Turner to come here to talk about what the mining industry can do. Yes, the diversification on the cathode side is obviously huge. and electric vehicles are all about efficiency, so for the electric vehicle industry, for the vehicle industry, we need to see powertrain efficiency actually increase in all the other companies that match the powertrain efficiency of Tesla power so that everyone can have that diversified cathode approach where you use lfp in the mid range and and even really make a 300 mile vehicle with lfp um and really the goal that we were trying to present here was a model for vertical integration strategic vertical integration that many different people can do what we need to see is a vertical integration that shortens the Yes the process path from mine to the cathode and you know what we are doing here is novel and we are trying to push the industry in that direction, so you know we're presenting a model here that anyone can follow, yeah.

In fact, if there's anything you want to comment on, feel free to step up and say something. I think the key is to be smart with your chemistry choices, your material choices, yes, if you're smart with your material choices, the spice will. It continues to flow, it is not necessary to use the same type everywhere and if it is about planning it strategically and for the miners, I think we are incentivizing them a lot to increase their production, yes, and in fact we had good decisions as if they were all motivated, I think they've been sitting there thinking: are you going to grow like crazy? and we thought, yes, we are going to grow like crazy and then I think this indicates that they are going to grow like crazy and that is what the miners want to hear and then they will make the investments hello elon uh this is ben olympic I am a musician I was wondering if tesla Do you have any future plans to do partnerships with music companies like you've done with 10 cent games or things like that for you guys to really expand your services, for artists and other types of creative people to get involved in producing content that can be part of the Tesla ecosystem or so that other people who do creative things can engage with you, well, no, we haven't really thought about that much, but I guess it's something we should probably think about.

We will provide a title in Tesla. You know, we're providing music, more music sources that people can choose from and generally trying to improve the in-car entertainment experience and I think actually, as we move towards a more autonomous future, The importance of entertainment and productivity will only increase. I mean I agree that if you're basically sitting in your car, the car is completely autonomous and you're driving somewhere, it's like being in a, I think you know the car is essentially your chauffeur and then uh, the things that they become important okay, well, let's have some good entertainment and uh, you know, if you want to do some productivity things, that actually starts to become a lot more important because you're no longer spending your attention driving the car.

It will be extremely important in the future if we ask some of the say.com questions. Okay, should we do the second one? Yes, the first. I think we already answered if we have, if we can. make enough sales, which we will try to do or supply to other companies. It is definitely not an intentional effort to keep sales for ourselves. If we can make enough for other companies, we will supply them and trying to do the right thing to advance sustainable energy, whatever it is, that the vehicle is so degraded, we get asked a lot, I think one thing that is important to keep in mind is that the vehicle does not go to the grid unless it has a power outage. it turns off as if it needs to cut off the main supply to the network; otherwise if you lose power to your house you're basically just going to put power back into the grid so just having a reversal in the power flow doesn't really uh keep the lights on um you need a completely separate system to cut off the power. power to the grid um and I think there's also the case that people really want the freedom to be able to drive and charge at home and obviously it's very problematic if uh, you know, you arrive in the morning and your car, instead of charging , it discharges in the house and then you're fine now I can drive or not use the battery to power my house uh I think it's actually going to be better or for people's freedom of action to have an electric wall um and a separate car um and then you know that everything works and you add that you basically combine that with solar or solar retrofit of a solar glass solar glass roof um and a local battery storage so you basically become your own utility um and then the car, you know, can also be charged with solar energy um, I think that's what works, uh, you know, that being said, we can certainly make a grid vehicle, um, I think we would like to, basically we could enable that with software in Europe or something, uh, yeah, um, we're future generations of power electronics, we'll be able to do this more or less everywhere from a similar energy market share perspective, but yeah, from a back. lift the house and it just so happens that the way the North American connectors are on all the cars in North America it doesn't matter if it's the tesla connector or the connector that the other vehicles have doesn't actually support powering your home.

It's unfortunate, so additional hardware is needed to do that, but yes, in the future, all versions of our vehicles will be able to at least realize a bidirectional energy flow in order to participate in the energy market, but even for that It is important. remember your car isn't plugged in 24/7 so it's kind of an unpredictable resource for the grid, it will have value but it's not the same as a stationary battery yeah honestly , a vehicle to the grid, sounds good, but I think it actually has a lot less utility than people think, um, I think very few people would use the vehicle network and, in fact, we had with the original roadster we had vehicle-to-grid capabilities, no one used it, how did we find the engineers to do everything?

We're saying how do we find engineers to do all these things. Well,I guess we recruit. We have recruited many engineers from all over the world. You know, I think Tesla has a good reputation for doing exciting engineering. and that tends to attract a lot of the best engineers in the world because they know that their efforts at tesla will really serve the greater good and we're very tough on engineering, you know, tesla is, first and foremost, an engineering company it's like hardcore engineering. it's what we do um so the amount of intensive engineering done tesla is crazy um and if you look, let's say uh, there are several surveys done in engineering schools uh, where do you want to go? um, like what's your best options and actually the two main options, the last one, you know, the last few years have been tesla and spacex, so sometimes it's tesla first, sometimes it's spacex first, but those are the two main ones yeah I mean if you're motivated to solve some of these problems which are the hardest problems in the world to solve that really fundamentally enable the future that we all need uh please reach out yeah and help us work on these issues absolutely and, as you said, the battle is far from over, you know less than one percent of the world.

The automotive fleet has converted to electric um and uh and even maybe 0.1 less than 0.1 percent of stationary storage has been done, so stationary storage has only just begun. The conversion of the world's vehicle fleet to electric has only just begun, so there is still a huge amount of engineering work. to do at Tesla and other companies to accelerate this transition towards sustainability. Hello, can you hear me? I'm Jordan from Mark Asset Management. He then talked about the importance of the factory and mentioned designing it from the ground up. process and many of the new things they are going to do or started doing in Shanghai, Berlin and Austin.

Could you help us understand and quantify how significant all those improvements will be financially and then taking into account what they want? We are trying to achieve as a company, is it fair to assume that the vast majority of improvements will be returned to the customer in the form of lower prices? Yeah, I mean, that's all. I think we will certainly try to give back as much as possible. as much as possible for customers, it's not like they know Tesla's profitability is incredibly high, they already know our average profitability over the last four quarters, maybe one percent, so just to be clear, it's not like if they knew we were minting money, our evaluation makes it sound like we are, but we're not, so we want to try to make the price as competitive as possible without losing money, and if you lose money, then you'll keep doing it if you keep losing money. .

We're going to die so we have to uh this thing called profit it's like we need to make more money than we spend otherwise we're dead but affordability is key to how we scale properly as demand becomes non-linear as we is reduced. the price of the car, yeah, I mean, it's important to separate the difference between affordability and value for money, or the desirability of the product, so you know a lot of people want to buy a Tesla that they just don't have. With enough money we could make the car infinitely desirable, but if someone doesn't have enough money they can't buy it.

Sometimes you know, if people you know forget this, it's like no, it's like someone has to have enough money to buy the car um and just making a super desirable but expensive car doesn't mean they can afford it, so that it's absolutely important and critical that we make cars that people can afford, yeah, um, so here's some of these things, uh, scroll down. below or something oh uh, when do you expect Tesla vehicles to surpass ICE vehicles in initial purchase price? I think one way to answer that question is in the kinds of vehicles we sell today.

We are already doing it. Yes, we are already pretty. Yes. Pretty. close um and then you take into account the total cost of ownership um the fact that electric wheeled vehicles require much less maintenance um and are much cheaper to run uh when you look at like you know the total cost of ownership and obviously you can lease a car, so If you just like to lease a car or get a car loan, you have your kind of monthly payment and then the cost of gasoline or electricity and the service cost and the total considered cost of an electric car is a lot . less than a gasoline car of the same nominal purchase price, you know, I'm serious and maybe in the order of, you know, three years, when we can do a lower cost like a 25,000 car, you know, I think which will be basically on par, maybe a little better than a comparable gasoline car, so I think maybe it will be on the order of three years, however, technological advances in greater vertical integration of battery manufacturing influence its ability to improve the environmental and social impact of the supply chain and I think so, I think we've already said that.

Yes, do you have any ability to scroll through this? I just scroll out. Do we cover recycling? Yes, let's scroll until we have things we haven't covered well. I've definitely covered that topic, one of the things we've already answered, I think we covered that one, I think we literally just answered that, oh, I saw a question about cathode durability, let's get to that one, down, down, down, good technical question, keep. Oh, how are you going to address the trifecta of cathode durability and cost of environmental impact? Is this something you're going to let the environmental supply chain solve?

No, I think we're trying to answer that directly, I mean we're really looking at not just what's going on in the cathode facility, but actually outside of the cathode facility that really should be inside and killing processes that shouldn't have been there in the first place. place and the use of added reagents are simply expensive and unnecessary and eliminate a lot of White Wastewater from the process guys, is there anything? Is there anything you want to add to maybe like uh review everyone like maybe say what you're doing and you know say some words I'm not sure um I just want to reiterate the fact that this is a huge problem, a huge problem and It looks like it's from Tesla. on the way and forward um but we need everyone's help um because it's everyone's planet and we're not going to get to 20 hours of terror alone so please think about this carefully um as it affects everyone so let's move forward, yeah and and obviously if you care about solving sustainability and doing heavy engineering definitely come work with Tesla, yes you know we went through a couple of manufacturing improvements, and you know it looks easy when you put together a nice slide deck, but the challenges They are like that, it is super challenging when you take materials out of the process, when you integrate the processes together, you have to do many things at the same time and that is like this immense engineering challenge, and then you know how to appreciate it.

You need to get through this, we need the best engineers we have and we have this amazing team. I just want to also thank our entire team who sees that you guys are amazing, who totally threw us off by putting this up. together and yes, yes, thank you, thank you, tesla team totally agree, yes, that's it, yes, yes, rodney westmoreland, handling the build here at tesla. What I would like to say is, a shout out to the team, the team has been working effortlessly. It is a very difficult project here 24 hours a day, it seems that it needs to be completed 24 hours a day.

What differentiates us from many other constructions. Yes, we have a construction company here. What differentiates us is that we are. integrated into the manufacturing process, so every detail that comes out of Drew's mouth is directly involved in the system we're building. That way, what would normally take three or four months to create a specification, our design team is working correctly. with the manufacturing equipment, to allow us to greatly accelerate the process, so yes, it is definitely an important part of the vertical integration approach is to be able to design the factory around the equipment, in fact, together with the equipment, so that the factory. at lower cost and faster yes, I'm Scott, I focus on cellular design.

I think it's hard to put into words how inspiring this is. I've been at this for a long time with Tesla and, yes, I really hope others have joined in. us since it disappeared is 2005. yeah, with a lot of you, um, but thank you, um, you know, yeah, they were already before drawing, but who's counting, um, but I'm really excited about what the team has been able to achieve in recent years. In a short period of time, about a year, it has truly been an incredible transformation. I hope what we've shown you inspires you to join us or join someone else in the effort and I couldn't think of a smarter, more hard-working team. working on this problem hi peter, I run the manufacturing improvement team and I think what I would like to point out is that manufacturing improvements are like the accelerator, so think about the execution that rodney talked about in terms of how fast We have been able to set up this factory, which is amazing and something that has been really incredible to be a part of, that is not enough, what we have to do is improve the manufacturing technology, that is the real accelerator and that is what we are really into. focused, talk about Elon.

I always say that really going in and improving that system is what's going to allow us to get to the scale and the cost that we need and then the other point I'd like to make is on the recruiting side, like it doesn't matter if you know. about batteries, if you come from any industry, you can do something fantastic in the work that we are doing, we talk to people from industries that you wouldn't imagine, like I talked to a guy who makes golf balls and he has things that are really shocking for what what we're doing so if you're in any industry and you want to be impactful here, for example, join us, that would be great hello, excuse me, hello, I'm Tony.

I have been working in lithium and cathode materials for almost 23 years and this is the most growth I have seen in a company. I've been here for a little over a year and a half. We are hiring incredible people that are allowing us to take advantage of technology that most of the industry is struggling to achieve, so to answer the question of how are we going to do this, we are really advancing lithium and cathode materials manufacturing beyond what has been achieved in the last 20 years. it's exciting, yes, my name is Turner, I work closely with the team that I've worked with a lot, with everyone here and on the cathode and upstream materials side, it's very important that everyone understands that this growth is to come, this growth is.

It's real, we're going to make all these batteries and everyone has to grow with us, the whole supply chain has to grow with us and if you have an idea that simplifies something in the supply chain, come talk to us, work with us and let's do it . any existing specification is wrong any existing manufacturing method is wrong process equipment is wrong it's just a matter of how wrong quote elon musk yes exactly we're wrong just a matter of how wrong try to be less wrong so tell us How do we do it. We are wrong and how could we do better so we can accelerate and improve as quickly as possible.

It's okay, I guess. Thank you all for coming. I hope you liked the presentation. A very exciting future ahead. You know, we are. We will be working at our damn desks to transition the world to sustainable energy as quickly as possible and your support and help is key to that success, so thank you again, much appreciated, and I look forward to the next event, thank you, thank you.