--- title: "Tesla Q1 2026 earnings call" company: "Tesla, Inc." quarter: "Q1 2026" call_date: 2026-04-22 duration: "1:05:20" words: 7649 source: "https://www.youtube.com/watch?v=qO7T5zgRvXM" transcript_url: "https://remount.co/transcripts/tesla/2026-q1" transcribed_by: "Remount (https://remount.co)" transcribed_at: 2026-10-26 method: "Transcribed by Remount from Tesla's official webcast replay on Tesla's YouTube channel with whisper.cpp (large-v3-turbo), speaker labels assigned by hand from the call itself." --- # Tesla Q1 2026 earnings call Full transcript. Call date: April 22, 2026. Length: 1:05:20. Transcribed by Remount from Tesla's public webcast. Free to read, download and quote; a link back to remount.co is appreciated. Machine-assisted transcript: check the webcast for exact wording. Remount is an independent company and is not affiliated with Tesla. - Web version: https://remount.co/transcripts/tesla/2026-q1 - Source webcast: https://www.youtube.com/watch?v=qO7T5zgRvXM - Plain text: https://remount.co/transcripts/tesla/2026-q1.txt - JSON: https://remount.co/transcripts/tesla/2026-q1.json ## Speakers - Travis Axelrod, Head of Investor Relations - Elon Musk, CEO - Vaibhav Taneja, CFO - Ashok Elluswamy, Vice President, AI Software - Unidentified speaker - Mike - Will Stein, Analyst, Truist - Pierre, Analyst, New Street - Dan, Analyst, Barclays - Mark, Analyst, Goldman Sachs - Lars Moravy, Vice President, Vehicle Engineering - Colin, Analyst, Wells Fargo ## Key statements, selected by Remount - "a very significant increase in capital expenditures. But I think well justified for a substantially increased future revenue stream." (Elon Musk, Capex, 7:53) https://remount.co/transcripts/tesla/2026-q1#t-473 - "and then probably being able to have Optimus be useful outside of Tesla sometime next year." (Elon Musk, Optimus, 8:41) https://remount.co/transcripts/tesla/2026-q1#t-521 - "We have just started production of Cybercab and we'll begin production of our Semi truck soon." (Elon Musk, Cybercab and Semi, 9:39) https://remount.co/transcripts/tesla/2026-q1#t-579 - "Demand for our Megapack is very strong and we're excited to begin production of Megapack 3 later this year in our new world-class factory outside Houston." (Elon Musk, Megapack 3, 11:14) https://remount.co/transcripts/tesla/2026-q1#t-674 - "We've expanded Robotaxi to Dallas and Houston using the same software as Austin and the Bay Area." (Elon Musk, Robotaxi expansion, 12:07) https://remount.co/transcripts/tesla/2026-q1#t-727 - "And we're constructing a second Optimus factory at our Giga Texas location. And that will probably start production around summer next year." (Elon Musk, Optimus factories, 13:05) https://remount.co/transcripts/tesla/2026-q1#t-785 - "Auto margins, excluding credits, improved sequentially from 17.9% to 19.2%." (Vaibhav Taneja, Auto margins, 17:17) https://remount.co/transcripts/tesla/2026-q1#t-1037 - "On the FSD adoption front, we continue to see improvement, reaching nearly 1.3 million paid customers globally." (Vaibhav Taneja, FSD adoption, 18:04) https://remount.co/transcripts/tesla/2026-q1#t-1084 - "In Q1, we deployed 8.8 gigawatt hour of energy storage, a 38% sequential decline. However, we still expect 2026 deployments to be higher than 2025." (Vaibhav Taneja, Energy storage, 19:40) https://remount.co/transcripts/tesla/2026-q1#t-1180 - "So based on that, our current expectation for 2025, 2026 is over 25 billion of CapEx." (Vaibhav Taneja, Capex guidance, 22:11) https://remount.co/transcripts/tesla/2026-q1#t-1331 - "The last S/X production will be in early May" (Elon Musk, Model S and Model X, 25:07) https://remount.co/transcripts/tesla/2026-q1#t-1507 - "But I do think it will be material, it'll be material probably in a significant way next year." (Elon Musk, Robotaxi revenue, 29:35) https://remount.co/transcripts/tesla/2026-q1#t-1775 - "I'm just guessing here, but probably in the fourth quarter." (Elon Musk, Unsupervised FSD in customer cars, 30:02) https://remount.co/transcripts/tesla/2026-q1#t-1802 - "Unfortunately, Hardware 3, I wish it were otherwise, but Hardware 3 simply does not have the capability to achieve unsupervised FSD." (Elon Musk, Hardware 3, 31:04) https://remount.co/transcripts/tesla/2026-q1#t-1864 - "And for what it's worth, in the meantime, we are going to also release a V14 version for Hardware 3." (Ashok Elluswamy, FSD V14 for Hardware 3, 33:06) https://remount.co/transcripts/tesla/2026-q1#t-1986 - "Yeah, I do expect that AI5 will go into Optimus and into the data center because it's looking like we'll be able to achieve unsupervised self-driving with AI4 that is far greater than human safety levels." (Elon Musk, AI5, 34:36) https://remount.co/transcripts/tesla/2026-q1#t-2076 - "probably a dozen states or more later this year." (Elon Musk, Unsupervised FSD expansion, 41:22) https://remount.co/transcripts/tesla/2026-q1#t-2482 - "In the near term, Tesla will be building the research fab on our Giga Texas campus. This is something we expect to be probably, you know, a $3 billion-ish initiative and capable of maybe a few thousand wafers per month." (Elon Musk, Terafab, 44:26) https://remount.co/transcripts/tesla/2026-q1#t-2666 - "So it would mean that, you know, you'd want a vast majority of your production to be Cybercab." (Elon Musk, Cybercab, 56:54) https://remount.co/transcripts/tesla/2026-q1#t-3414 ## Transcript ### Prepared remarks **Travis Axelrod**, Head of Investor Relations [7:00] Good afternoon, everyone, and welcome to Tesla's first quarter 2026 Q&A webcast. My name is Travis Axelrod, head of Investor Relations, and I'm joined today by Elon Musk, Vaibhav Taneja, and a number of other executives. Our Q1 results were announced at about 3 p.m. Central Time in the update deck we published at the same link as this webcast. During this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. [7:39] During the question and answer portion of today's call, please limit yourself to one question and one follow-up. Please use the raise hand button to join the question queue. Before we jump into Q&A, Elon has some opening remarks. Elon? **Elon Musk**, CEO [7:53] Thank you. So I think we've got a very exciting year ahead of us with 2026. We're going to be substantially increasing our investments in the future. So we should expect to see a very significant increase in capital expenditures. But I think well justified for a substantially increased future revenue stream. And obviously Tesla's not alone in this. I think you've seen most, if not all, certainly the major technology companies substantially increasing their capital investments. And we're going to be doing the same. I think it's going to pay off in a very big way. [8:41] So we're investing in and improving our core technologies, battery powertrain, AI software, AI training, chip design, manufacturing, you know, laying the groundwork for significantly increased manufacturing production. We are also strengthening our supply chain across the board, batteries, energy, AI, silicon, everything, and laying the groundwork, like I said, for what we expect to be a significant increase in vehicle production in the future. And of course, a very significant increase, well, actually releasing Optimus, but increasing our internal production for testing, and then probably being able to have Optimus be useful outside of Tesla sometime next year. [9:39] As you've heard me say a few times, I think Optimus will be our biggest product, not just Tesla's biggest product ever, but probably the biggest product ever. And I remain convinced of that conclusion. So on our vehicle side, it's always, I think worth noting that a Tesla car is incredibly, incredible value for money and they're all autonomy ready, depending on what part of the world you're in. The supervised full self-driving is getting extremely good. We have just started production of Cybercab and we'll begin production of our Semi truck soon. [10:30] Now I should say, whenever you have a new product with a completely new supply chain, new everything, it's always a stretched out S-curve, so you should expect that initial production of Cybercab and Semi will be very slow. But then ramping up and going kind of exponential towards the end of the year and certainly next year. And in fact, we'll be ramping up production of all vehicles and all factories to the best of our ability through the balance of this year. On the energy front, the United States and the whole world will need a lot of energy storage to meet growing electricity demand. [11:14] Demand for our Megapack is very strong and we're excited to begin production of Megapack 3 later this year in our new world-class factory outside Houston. For full self-driving and Robotaxi, version 14.3 was a major architectural update and we have a whole pipeline of major improvements to full self-driving that we believe will lead to unsupervised full self-driving being available anywhere in the world that it is legal to do so. And then there's a version 15, hopefully by the end of this year, but certainly by early next year. [12:07] And that will be a complete overhaul of the software architecture. And we'll run on AI4, that's, and at that point, we're really just increasing the safety level of FSD above human safety level even more, meaning, I think, even within version 14, we're significantly safer than human, but V15 will take that to another level. We've expanded Robotaxi to Dallas and Houston using the same software as Austin and the Bay Area. And the limiting factor for expansion is really rigorous validation, making sure things are completely safe. We don't want to have a single accident or injury with the expansion of Robotaxi. [13:05] And we have, to the credit of the team, not had a single one to date. And then Optimus, we're preparing Fremont for start of production later this year with Optimus. Again, totally new supply chain, totally new technology. So therefore, the production S-curve is always very slow in the beginning, but we'll ramp up to significant numbers next year. And we're constructing a second Optimus factory at our Giga Texas location. And that will probably start production around summer next year. The V3 Optimus design is almost ready to demonstrate. [13:52] I think we want to just make sure it's like polished. Like it works functionally, but there's some aesthetic elements that need to be finalized. And I think probably middle of this year we should be able to show it off. We're also a little hesitant to show V3 off because we find our competitors do a frame by frame analysis whenever we release something and copy everything they possibly can. So I think there's some value to not showing new technology until it's close to production. Congratulations to, again, to the Tesla AI chip team for taping out AI5. That's going to be a great chip. [14:45] I think probably the best AI inference chip for edge compute that exists. And certainly I think unequivocally the best value for money. The team did a great job. And we already have a lot of momentum for designing AI6, and we've begun to discuss ideas for Dojo 3. So this is all very exciting. We've also finalized plans for the chip fab, the research chip fab on the Giga Texas campus, and we'll start construction of that this year. In conclusion, Tesla is working on a lot of large ambitious projects. They're all very, very challenging, but I think they're going to be revolutionary. And this is what the team does best, solve the hardest problems and build amazing products. And I'd like to thank the Tesla team for all the hard work and thank you to all of our supporters. **Travis Axelrod**, Head of Investor Relations [15:54] Great. Thank you very much, Elon. And Vaibhav also has some opening remarks. **Vaibhav Taneja**, CFO [15:59] Thanks, Travis. So, 2026 has had an interesting start, not just for us, but I think the world in general. On the autos business, we have seen a resurgence in demand in EMEA and certain countries like France and Germany showing over 150% quarter-over-quarter growth in deliveries. In APAC, we've witnessed growth in South Korea and Japan again in terms of deliveries. Even out here in the U.S., we've seen a slight growth in terms of quarter-quarter deliveries. On the order backlog front, we ended the quarter with the highest Q1 order backlog in over two years. [16:39] Whilst the recent increase in gas prices has had a positive impact on the order rate, this improvement started before the uptrend in gas prices. This is due to the work done by the Tesla team in bringing more compelling and affordable vehicles to market. Ten years back, when we launched Model 3 in the U.S. with the promise of $35,000 starting price, which, if you adjust today for inflation, translates to about $48,000 in today's dollar terms, the starting price of Model 3 today is way less than that, while the product is way more compelling from where it started. [17:17] Given this setup, we're focused on increasing our overall production volume, something that we already started in Q1. This volume increase is evidenced by the Giga Berlin reaching a record output of over 61,000 units in Q1. We plan to keep growing volumes further, not just in Berlin, but across all our factories. Our biggest limiter continues to be our battery pack capacity, and we are actively working on resolving that. Auto margins, excluding credits, improved sequentially from 17.9% to 19.2%. Note that we've had certain one-time benefits from warranty true downs, around $230 million, and some relief on tariffs. [18:04] We have not realized any benefit from the recent Supreme Court ruling on IEEPA tariffs, as there is still a lot of uncertainty around the final outcome. Both tariffs and sustained high interest rates continue to add to our automotive cost. Interest rate subvention costs are recognized up front. If interest rates continue to rise, our cost of subvention will continue to impact auto margins. On the FSD adoption front, we continue to see improvement, reaching nearly 1.3 million paid customers globally. The bulk of the growth came from subscriptions, while upfront purchases only increased 7% as we removed the purchase option in some markets in Q1. [18:49] We recently received approvals for FSD in Netherlands. This sets up us well for an EU-wide approval later in Q2, and we're just gated by how the regulators go about it. Additionally, we've also received approvals in China. The broader approval is still not there, but we're working with the regulators in the country, and we're hoping that we can get approval by Q3. With these approvals coming through, we expect the broader adoption of the software in the existing fleet and incremental demand for our vehicles. With all this in mind, we have evolved our vehicle sales strategy where we now emphasize FSD as a product and vehicle as only the delivery mechanism. [19:40] As we have noted previously, the energy storage business is inherently lumpy, tied to customer deployment timelines. In Q1, we deployed 8.8 gigawatt hour of energy storage, a 38% sequential decline. However, we still expect 2026 deployments to be higher than 2025. We set yet another record with gross margins in this business over 39.5% due to some one-time benefits from certain tariff recognitions of more than $250 million from certain tariffs which were paid in prior quarters. On a normalized basis, we continue to expect energy compression from here with increasing competition and tariff impacts. As previously discussed, tariffs in this business can have outsized impacts as most of the battery cells are procured from China. Our order backlog for this business is robust and we're doing our best to build not just based on existing demand but also on expected demand. [20:46] Services and others improve sequentially from 8.8% to 9.2%. This includes a collection of efforts meant to support our customers like service centers, used cars, paid supercharging, part sales, insurance, and even our Robotaxi business. We're making deliberate investments in the infrastructure to help the Robotaxi in the future. We grew the Robotaxi fleet quarter over quarter, and we expect to keep ramping the fleet as we accelerate and get into other geographies. On operating expenses side, we did increase sequentially from a full-quarter stock-based compensation expense for the 2025 CEO compensation plan, for which one milestone is still deemed probable. Additionally, our spend on AI-related initiatives, including expense on development of our own AI5 chip and new products like Cybercabs, Semi, Optimus, and Megablock, etc., continue to be at elevated levels, and we expect this trend to continue for the full year, 2026. Net income was impacted from mark-to-market charges on our Bitcoin holdings, which depreciated 22% as compared to the last quarter, and the unfavorable impact of FX, primarily from our large intercompany borrowings. [22:11] On free cash flow, we ended the quarter with just over $1.4 billion. As Elon mentioned, we are in a very big capital investment phase which is going to start now and would last a couple of years. So based on that, our current expectation for 2025, 2026 is over 25 billion of CapEx. And, you know, just to remind you, we are paying for six factories which we're going to go into operation. Some have already started, some would go into operation later part of this year. We're further increasing our investment in AI-related initiatives, including the AI infrastructure to support Robotaxi and the launch of Optimus. We've already started placing orders for the research semiconductor fab in Austin and for solar manufacturing equipment. While this may seem a lot and will have the impact of negative free cash flow for the rest of the year, we believe this is the right strategy to position the company for the next era. We'll make such investments in a very capital efficient manner. [23:18] We're actively working on our mission of building a future of amazing abundance. However, that requires not just a lot of investment, but an immense amount of execution. The future is going to be great, and the whole Tesla team is rising to the occasion to make this a reality. I would like to end by thanking the Tesla team, our customers, investors, and vendors for having confidence in us on this journey. Thanks. ### Questions and answers **Travis Axelrod**, Head of Investor Relations [23:47] Thank you very much, Vaibhav. Now we're going to go to investor questions, starting with a question from Say.com. The first question is, when will we have the Optimus 3 reveal, which we already touched on? But the rest of the question is, when will Optimus production start since we ended the Model X and S production earlier this mid-year? And then what's the expected Optimus production rate exiting this year, and what are the initial targeted skills? **Elon Musk**, CEO [24:17] Well, as I was saying, what we found is that when we've unveiled various Optimus versions, we found out how competitors literally do a frame by frame analysis and copy everything we're doing. So I think we want to push the Optimus 3 unveil, maybe closer to production. Start of production is, we're assuming is somewhere around the late July, August time frame. And, I mean, just to inject some reality into these questions, since these questions are not, whoever does this question does not fully understand what happens with the production line. [25:07] The last S/X production will be in early May, but you have to look at the entire upstream portion of the production line. So you have to start with, you know, cells, battery packs, you know, motor production, all the parts production. And so we've been dismantling the S/X production line, you know, from the more base level parts, the more basic level parts to, as you get to larger sub assemblies, you start dismantling the line from the small parts first, not from the final assembly first. So the final assembly line will, that'll be dismantled next month and after the last of the S/X vehicles done. [25:56] Now you can't dismantle some gigantic production line like overnight, it takes at least a few months to do so. And then you've got to install a new production line and you've got to provide all of the wiring and communication to test out the machines of the new production line for Optimus. So that also takes several months. So frankly, if we're able to go from stopping production on one line, dismantling that entire line, reinstalling a whole new line and turning that on in a matter of four months, That is an insanely fast speed. [26:42] I don't think any other company on Earth has ever done that before. Just to put things into perspective and inject some reality into the situation here. I don't know what the production rate of Optimus will be this year. It is impossible to predict these things. When you have a brand new product and an entirely new production line, and you have 10,000 unique items, all of which have to go right to ramp production, it'll move as fast as the least lucky, slowest, dumbest part in the entire 10,000. [27:26] And this is Optimus is a completely new product with a completely new production line. So, it's just literally impossible to predict. Except that I think it will be quite slow at first as we iron out the 10,000 plus unique items that have to be solved for Optimus to reach volume production. Initial skills will be, obviously we're going to start with simple skills, in the factory and and then build up from there. **Travis Axelrod**, Head of Investor Relations [28:13] Great, thank you, Elon. The next question is, what milestones are you targeting for unsupervised FSD and Robotaxi expansion beyond Austin this year, and how will that drive recurring revenue? **Elon Musk**, CEO [28:36] Well, we, we certainly hope to be, have, unsupervised FSD or slash Robotaxi, operating, you know, in, I don't know, a dozen or so states by the end of this year. Initially, you know, we're taking it very, we're taking a very cautious approach to the rollout here. Like we do, we haven't had any injuries and certainly no fatalities to date with the unsupervised, unsupervised FSD and Robotaxi expansion. We want to keep it that way. And so, I don't, I think probably unsupervised FSD or Robotaxi revenue will not be super material this year. [29:35] But I do think it will be material, it'll be material probably in a significant way next year. **Travis Axelrod**, Head of Investor Relations [29:45] Great, thank you very much. The next question is, when do you expect FSD unsupervised to reach customer cars? **Elon Musk**, CEO [30:02] I'm just guessing here, but probably in the fourth quarter. It's difficult to release this like to everyone everywhere all at once because we do want to make sure that they're not unique situations in a city that, you know, particularly complex intersection or, you know, actually they tend to be places where, where people get into accidents a lot because, because they're just, you know, perhaps there's an unsafe intersection or bad road markings or, you know, a lot of weather challenges. So, so I think we would release unsupervised gradually to the customer fleet, but, you know, to, yeah, as we feel like a particular geography is confirmed to be safe. **Travis Axelrod**, Head of Investor Relations [30:55] Great. And the next question is, how will Hardware 3 cars reach unsupervised FSD? **Elon Musk**, CEO [31:04] Unfortunately, Hardware 3, I wish it were otherwise, but Hardware 3 simply does not have the capability to achieve unsupervised FSD. You know, we did think at one point it would have that, but relative to Hardware 4, it has only one eighth of the memory bandwidth of Hardware 4. And memory bandwidth is one of the key elements needed for unsupervised FSD. It's just generally a thing that's needed for AI. If you're doing an autoregressive transformer, memory bandwidth is the [inaudible] point. So for customers that have bought FSD, what we're offering is essentially a trade-in, like a discounted trade-in for cars that have AI4 hardware. [32:07] And we'll also be offering the ability to upgrade the car to replace the computer. And you also need to replace the cameras, unfortunately, to go to Hardware 4. So to do this efficiently, we're going to have to set up like kind of micro factories or small factories in major metropolitan areas in order to do it efficiently. Because if it's done just at the service center, it is extremely slow to do so and inefficient. So we basically need like many production lines to make the change. And I do think over time, it's going to make sense for us to convert all Hardware 3 cars to Hardware 4, because that's what enables them to enter the Robotaxi fleet and have unsupervised FSD. **Ashok Elluswamy**, Vice President, AI Software [33:06] And for what it's worth, in the meantime, we are going to also release a V14 version for Hardware 3. This will be a distilled version of the same V14 software that we released for Hardware 4. And people should be able to start the drives from park state and basically have all the features that V14 for Hardware 4 has. And that's expected to come end of June. **Travis Axelrod**, Head of Investor Relations [33:35] Great. Thank you very much. The next question is, what enabled you to finish the AI5 tape out early, and were there any changes to the original vision? Last week, Elon said AI5 will go into Optimus and the supercomputer, but one month ago said it would go into the Robotaxi. Has AI5 been dropped from the vehicle roadmap? **Elon Musk**, CEO [33:55] Well, the reason AI5 tape out finished early was because the team worked incredibly hard to make it happen. And just over time we gathered a lot of momentum. But we did have to work every weekend for six months straight, including every holiday. So it was a lot of sacrifice by the team, and I was there, of course, myself, every weekend. And, you know, fortunately we didn't encounter any major, we didn't make any major mistakes at least that we're aware of, that required pushing out the tape out. [34:36] So the team just did a great job and worked incredibly hard is the reason. Yeah, I do expect that AI5 will go into Optimus and into the data center because it's looking like we'll be able to achieve unsupervised self-driving with AI4 that is far greater than human safety levels. So, which means it's certainly not immediately needed in the car. At some point, I think it will make sense for us to switch to AI5 in the car, but that's, but there's not a pressing issue to do so. [35:31] So, but at some point the AI4 hardware is going to get like so old that it's like, okay, you know, the only reason they're keeping the factory open is for AI4. We are planning an AI4 upgrade to use a newer generation RAM. So it'll go from 16 gigabytes to I think 32 gigabytes per SOC. So a total of 64 gigabytes and probably a 10% increase in compute and sort of into trillions of operations per second and in memory bandwidth. So that's AI4.1 or AI4 plus, probably goes into production in the next year, I think. It depends, it's, it depends on, on Samsung's doing the modifications for us, so it sort of depends on, on when they're able to finish that, finish those modifications and bring it to production. **Travis Axelrod**, Head of Investor Relations [36:39] Great. The next question is, now that FSD has been approved in the Netherlands and is expected to launch across Europe this summer, can you discuss your Robotaxi strategy for the region? **Elon Musk**, CEO [36:52] Well, we're probably jumping the gun here on Robotaxi in Europe since it is, took us an immense amount of time just to get supervised self-driving approved in Europe. And, you know, these, we don't control the regulators, you know, it's, we push as hard as we can, but that's, it's ultimately up to the governments in Europe and the EU to decide what to do. So yeah, as it is, we've only been approved in Netherlands. We expect to be approved in a lot of other countries. And I think the supervised FSD goes to Brussels for EU review in May, yeah. [37:43] So, obviously, the next thing beyond that is to aim for unsupervised self-driving or Robotaxi in Europe. I actually don't know what the timeframe for that is, and would be somewhat at the mercy of the regulators as to when that approval would take place. **Ashok Elluswamy**, Vice President, AI Software [38:09] And from a technology standpoint, what we deployed in Netherlands and Europe is the same exact architecture and the training procedure and so on, except it had more Europe data. And I suspect the same thing will be true for unsupervised FSD as well. Whatever we used to solve in the U.S. will work in other places in the rest of the world too, provided we were able to add the data from the local regions. **Travis Axelrod**, Head of Investor Relations [38:33] Great. The next question is, given the recent NHTSA incident filings, can you update us on the Robotaxi safety data? If safety validation remains the primary bottleneck, why not deploy thousands of vehicles to accelerate removal of the safety driver? **Unidentified speaker** [38:50] Ashok, do you want to take that? **Ashok Elluswamy**, Vice President, AI Software [38:52] Yeah, we are increasing the amount of our QA fleet, but we also want to use the customer fleet to give us the useful metrics back so that we can scale it safely. Like [inaudible] mentioned, we are absolutely focused on safety, and so far we have zero incidents. And that's what the NHTSA filing also shows. In addition to safety, we are also solving some of these so-called scaling issues. For example, you do not want the Robotaxi to be stuck blocking intersections or don't want to be dropping people off at slightly incorrect locations and so on. So we are simultaneously solving the long tail of safety by monitoring the metrics across the entire Tesla customer vehicle fleet, which is close to driving 10 billion miles on FSD in the next few weeks, and also scaling up the amount of QA fleet that we have across the entire U.S. to accelerate our safety validation while also scaling the rest of the factors that can throttle the increase of unsupervised vehicles. **Travis Axelrod**, Head of Investor Relations [39:58] All right. The next question is, is V14.3 still the last piece of the puzzle to enable large-scale unsupervised FSD and Robotaxi, or do we have to wait until V15? **Elon Musk**, CEO [40:16] Well, no, I think 14.3 is, is the last piece of the puzzle for unsupervised FSD. Now the question is like degrees of safety, like how, safety and convenience, I suppose. We have a lot of known improvements, like major architectural improvements that we know would improve the probability of safety significantly. So I think it's not going to make sense for us to deploy, you know, unsupervised FSD or Robotaxi at large scale when we know that there are major architectural improvements to the software that can improve safety. So I think we're going to want to finish writing that software, validate it, and release it before going to large scale unsupervised FSD, depending on what large scale means. [41:22] I mean, we are, of course, as I mentioned earlier, doing unsupervised FSD in three cities and will expand to, like I said, probably a dozen states or more later this year. So it kind of depends on where your definition of large scale is. But I do think it wouldn't be right for us to go to a very large scale unsupervised FSD when we know that there are software improvements in the pipeline that would improve safety. **Ashok Elluswamy**, Vice President, AI Software [41:58] Yep, and I'd like to note that the version of Robotaxi that's running in Austin, Dallas, Houston, et cetera, those are essentially 14.3 variants. And it's obviously safe that that's why we're able to launch in those cities and we continue to expand based on the V13, sorry, V14.3 base for a while until V15 lands. And V15 is going to be a major upgrade. **Unidentified speaker** [42:24] Yeah. **Travis Axelrod**, Head of Investor Relations [42:27] Great, thank you. The next two questions we've already answered about Robotaxi rollout and the data that we're observing. So we will end on the last question, which is, what is Tesla doing to scale the energy generation business with solar? Residential roof deployments have stalled. Will Tesla move to regional solar and battery farms, perhaps coupled to Superchargers? Will we deploy solar through utilities? **Mike** [42:57] Yeah, the overall U.S. residential solar market is going through a bit of a correction after the loss of the homeowner tax credit last year. But we still see strong demand shaping up for the second half of the year. Tesla introduced a lease product this year that allows us to capture the tax credit ourselves and offer competitive pricing for homeowners. We have also debuted our own solar panel with superior performance and aesthetics, as well as our own best-in-class mounting system that gives us a fully integrated home energy ecosystem. [43:27] We strongly believe that solar and storage markets globally will continue to grow at both residential and utility scale, and we will continue to invest in that growth. **Travis Axelrod**, Head of Investor Relations [43:38] Great. Thank you, Mike. So now we're going to move on to analyst questions. The first question is going to come from Will Stein at Truist. Will, please feel free to unmute yourself when you're ready. **Will Stein**, Analyst, Truist [43:54] Can you hear me? **Travis Axelrod**, Head of Investor Relations [43:55] Yes, yes, we can. **Will Stein**, Analyst, Truist [43:58] Great, great. Thanks for taking my question. Considering the various parties involved in the Terafab project, I'm hoping you can provide some details for investors about which party is going to take responsibility for each aspect of that project, funding it, designing it, building it, operating, taking production, and the like, we'd love to hear some more details. **Elon Musk**, CEO [44:26] Yeah, so we're still working out the details of the Terafab deployment. In the near term, Tesla will be building the research fab on our Giga Texas campus. This is something we expect to be probably, you know, a $3 billion-ish initiative and capable of maybe a few thousand wafers per month. But it's really intended to try out ideas, the research fab, both in terms of maybe we have some ideas for improving the fundamental technology of how chips are made, and some of the, there's some new physics we'd like to test out, but we also want to test out the ability to, to see if something is working in production. [45:30] So you need kind of like a few thousand wafer starts a month to make sure that a production process is sound. And then SpaceX is going to take care of like the initial phase of the scaled up Terafab. And that's what we've figured out thus far. You know, any kind of intercompany thing has to be approved by both the SpaceX and Tesla board of directors. It's got to go through a conflict resolution. It's going to have a lot of, unfortunately, a lot of complexity because we've got to make sure Tesla shareholders are served and SpaceX shareholders are served and strike the right balance there. [46:23] So it takes a while to work through the kind of independent director reviews on this. So that's basically what we figured out thus far, is Tesla is doing the research fab, SpaceX is doing the initial part of the large-scale Terafab, and then we've got to figure out the rest. **Will Stein**, Analyst, Truist [46:46] And what about Intel's involvement? **Elon Musk**, CEO [46:49] Yeah, so Intel is excited to partner with us on some of the core manufacturing technologies. So we plan to use Intel's 14A process, which is state-of-the-art, and in fact, not yet totally complete. So, but given that by the time Terafab scales up, 14A will be probably fairly mature or ready for prime time. 14A seems like the right move. And we have a great relationship with Intel. A lot of respect for the CEO, the CTO, and the new team there. So we think it's going to be a great partnership. **Vaibhav Taneja**, CFO [47:45] Yeah, and the other thing on the research fab, I think we've said it before, we plan to do memory, logic, everything in the same place, including masks, because we want to have a quick iteration loop so that we can see and basically scale the technologies which we're trying to bring up. **Elon Musk**, CEO [48:04] Yeah, I think this will be unique in the world, or at least I'm not aware of any place where you'd, you have the lithography mask creation, and then logic, memory and packaging in, in under one roof, in one building. That, that's about the fastest I could possibly imagine doing recursive research and development and, and being able to try out some pretty radical ideas, some of which have, you know, it's kind of long shot stuff, but if some of these long shots pan out would be radical improvements in the way chips work. **Travis Axelrod**, Head of Investor Relations [48:49] Great. The next question is going to come from Pierre at New Street. Pierre, please feel free to unmute yourself. **Pierre**, Analyst, New Street [48:58] Hey, thanks a lot for taking my question. A quick one first on the FSD adoption. So you have 180,000 new users, paying users this quarter. And I compare that to your overall install base, it might be 15%. But then if I shrink that to the US or to North America, where most of them are, it's probably more like 30%, 35%. And I'm trying to, and I compare that, you probably sold about 100,000 cars in North America in the quarter. So you're winning twice more FSD users and you're selling cars. [49:37] And then if I add to that picture the fact that I guess it's mostly Hardware 4 owners who subscribe to FSD, it sounds like most drivers in North America who have Hardware 4 would already be using FSD. Is that the right way to think about it? And the kind of like success FSD is meeting today, is that, is that the right way to think about it? **Vaibhav Taneja**, CFO [50:03] Yeah, I think you're thinking about it the right way. And the other thing which I'll share is that, you know, you can't just look at one quarter versus the other quarter in terms of churn, but we are actually seeing churn of subscribers also coming down, which again is a reflection of the product is getting better. And obviously if subscriptions are going up, that is a good metric. The other thing also to note is that we are seeing customers actually drive longer, which again, you could correlate it. That's why you have lesser churn because people are liking the product. [50:43] And if, I mean, I've said this before, if I just use my own personal behavior, right, I literally get in the car, I press a button, and it just goes, and earlier I used to park, now I don't even have to park. And that is the experience which we want everybody to gain, and that's why you're starting seeing it in the numbers come through. **Pierre**, Analyst, New Street [51:09] Excellent, thank you. And if I may, maybe a quick follow-up, completely different. It's more on the Optimus architecture. And you talked about the partnership with xAI and Grok. And I was wondering if you can share with us anything about how the System 2 intelligence is going to be implemented. Is that going to be on board on chips inside Optimus? Or if we should think about like your fleet of like a million Optimus being produced a year, actually driving very significant inference demand in data centers as well for System 2 thinking. **Elon Musk**, CEO [51:52] Well, we think we can put a lot of intelligence locally in the robot, and it certainly needs to be enough intelligence that if the robot gets disconnected, like if it's a bad cellular signal or there isn't Wi-Fi, you know, Optimus can't just get stuck. It needs to have enough local intelligence that it can still do useful things, you know, even if it loses connection. Kind of like the car. Like the car does not need any cellular or Wi-Fi connection to be able to drive safely. Now, I guess you can think of like, Optimus needs kind of a manager to tell it what to do, broadly speaking. [52:34] Like if, you know, otherwise it's going to keep doing the same thing it did before. So, you know, I think you need kind of an orchestration AI, which, you know, Grok would be good for orchestration. And then for, you know, for Optimus' voice, you know, having a low latency, intelligent voice AI, Grok is actually very good for that. So if you want to talk to Optimus and have kind of a, you know, a Grok level conversation, you kind of need to connect to a Grok level AI for that. [53:19] But I would expect the amount of interaction, apart from like, you know, the voice stuff and asking complicated questions of the robot that necessarily needs a large AI model to answer, Grok would probably have about as much interaction with Optimus as a manager would have with the people on their team. So meaning Optimus could probably work for several hours without any management oversight. **Travis Axelrod**, Head of Investor Relations [53:54] Great. The next question is going to come from Dan at Barclays. Dan, please feel free to unmute yourself. **Dan**, Analyst, Barclays [54:03] Great. Good evening. Thank you for taking questions. Elon, your chip suppliers generally generate pretty good economics on the chip they sell. Your approach has historically been on vertical integration. Part of that has been to get better economics. So I know the longer-term goal of Terafab is to get the supply you need, but how much of Terafab is also motivated to get better economics on your midterm chip purchases? And how long is it going to take to ramp to get to yield that achieves that type of economic parity? **Elon Musk**, CEO [54:43] No, I mean, Terafab is not some sort of mechanism to generate leverage over our chip suppliers. It's just literally, we don't see a path to having enough sufficient quantity of AI chips down the road as we scale production to high levels. Just the rate at which the industry is growing in logic, but even more so in memory, we just anticipate hitting the wall if we don't make chips ourselves. So that's the reason for the Terafab. I think that we do have some ideas for how to make maybe radically better AI chips. [55:35] These are kind of research ideas there, which means like a long shot, but if a long shot pays off, it's maybe a giant improvement. And it's just easier to do that if we have our own research fab and are developing our own production technologies. So and if you look sort of long-term at, you know, say having AI satellites, making chips for those, there's just, there's not just no way in hell the existing industry can keep up with that. It's impossible. **Travis Axelrod**, Head of Investor Relations [56:13] All right. And our next question is going to come from Mark at Goldman Sachs. Mark, please feel free to unmute yourself. **Mark**, Analyst, Goldman Sachs [56:22] Yes. Good afternoon. Thank you very much for taking my question. I recognize the importance of FSD and that FSD can help to drive vehicle sales. And nice to see some of the improvements in the FSD technology more recently with version 14. However, I'm also hoping to understand if the company's view on new vehicle models has evolved. And I ask, given that, Elon, you posted on X recently that Tesla could develop a family vehicle. There's also been some past discussion about a compact vehicle. **Elon Musk**, CEO [56:54] Well, I mean, Cybercab is the compact vehicle. It's actually, I mean, it's very roomy, but it's a two-person vehicle. And we do think probably most of our production long-term will be Cybercab because 90% of miles driven are with two or one or two people. So it would mean that, you know, you'd want a vast majority of your production to be Cybercab. Then, but over time, it's going to make sense for our whole lineup to be autonomous vehicles of different sizes. And I, I did talk a bit about this, when we did the kind of AI day in LA at Warner Brothers and, you know, showed like, this is our current lineup and this is what, you know, some idea of what our future lineup will be, which is that it's going to be almost entirely autonomous. [57:45] In fact, long-term, the only manually driven car will be the new Tesla Roadster. Speaking of which, we may be able to debut that in a month or so. It requires a lot of testing and validation before we can actually have a demo and not have something go wrong with the demo. But I think it will be one of the most exciting product unveils ever. I don't think it moves the needle massively from a revenue standpoint, but it is very cool. I think it might be one of the most spectacular demos ever. **Travis Axelrod**, Head of Investor Relations [58:31] All right, Mark, did you have a follow-up question? **Mark**, Analyst, Goldman Sachs [58:35] Yeah, thanks, Travis. My other question was on batteries, and the company mentioned batteries as a constraint on its growth. Can you speak more to how Tesla expects to resolve this and to what extent that might come from ramping up your own LFP and 4680 battery cell manufacturing, or is this something that you'd expect to resolve primarily with increased sourcing from suppliers? Thank you. **Vaibhav Taneja**, CFO [58:56] Yeah, so at the moment, I think the limiter is not the cells itself, it's the battery pack capacity. And, you know, we're, like I said in my opening remarks, we're actively working on resolving this. There's more capacity being added as we speak, and I'll let Lars add a few more things to it. **Lars Moravy**, Vice President, Vehicle Engineering [59:16] Yeah, thanks. As you guys may have seen in Berlin, we started launching a Model Y battery pack with our in-house 4680 cells a few months ago, and that is ramping up nicely, adding to Berlin's output and helping with the demand surge that we've seen in Europe. As well, we're adding additional capacity in our Reno facility, sort of retooling it as it's been building packs now for, you know, almost 10 years. And in order to put in some more efficient lines and get, you know, additional output out there. And then, you know, we continue to have growth in China as well, ramping in-house LFP module production and battery packs associated with that. So all of those things are happening now and in the next months. And that's, you know, really plans we laid out a few months back to increase that output with the growing demand. **Travis Axelrod**, Head of Investor Relations [1:00:08] All right. Thank you, guys. And our next analyst is going to be Colin from Wells Fargo. Colin, please feel free to unmute yourself. **Colin**, Analyst, Wells Fargo [1:00:19] Oh, great. Thanks for taking my questions. You moved the safety driver in Austin and you're now expanding into Dallas and Houston. What are the key safety metrics that you're tracking that gives you confidence that Robotaxi is safe enough to expand? Is it sort of miles per intervention, miles per accident, per fatality, and where do you stand on that now? **Ashok Elluswamy**, Vice President, AI Software [1:00:44] Yeah, we track basically all the metrics that you mentioned. We have a pretty large QA fleet spread across all of the United States, and then we, you know, look at any intervention that could happen and then sort of simulate both in practice and also in our simulators that are very, very good nowadays using neural networks as what would have happened. And then based on all these analysis, we in the end make the call to expand. And so far, all of the expansions have gone according to our expectations. **Elon Musk**, CEO [1:01:15] Yeah, a lot of the limiting, a lot of what limits wider deployment of Robotaxi are actually not safety issues but convenience issues, or the car basically gets paranoid and gets stuck. Like sometimes it gets, because it's programmed for maximum safety, so the problem is that then it sometimes just gets scared to do things. So like it sometimes gets scared to cross railroads, for example, or it'll get stuck at, you know, a light where there's, the light, the light never changes from red. Or, I mean, there was one kind of amusing situation where a whole bunch of Robotaxis got stuck in the left turn lane in Austin because, I kid you not, a Waymo had crashed into a bus. And so they could not turn left because the Waymo had crashed into the bus. [1:02:12] And so you had this like long line of like, I don't know, a dozen or more Tesla Robotaxis that were waiting for the bus to move, but the bus was never going to move because the Waymo has crashed into the bus. So that obviously drives people crazy if there's a whole bunch of Robotaxis blocking the whole road. So it's a ton of things like that. That's the single biggest thing is just the car being scared to move or getting kind of stuck in situations like that. We've also had literal infinite loops where the car might want to make a turn into a road, but there's construction and then it goes around the block, tries to turn into the road with construction, goes around the block, tries to turn the road. [1:03:00] And so you have to stop the infinite looping, the literal infinite looping. So those are by far the issues that we have to resolve as opposed to direct safety issues. **Colin**, Analyst, Wells Fargo [1:03:17] Got it. **Travis Axelrod**, Head of Investor Relations [1:03:18] Great. Did you have a follow-up, Colin? **Colin**, Analyst, Wells Fargo [1:03:20] Yeah, just last year I asked about FSD and camera and the issues with sun glare and you noted that there was a breakthrough with direct photon counting that address this issue. But a month ago, there was a NHTSA filing saying that they haven't received an update when the solution was deployed and the number of vehicles. Is this, did it require a retrofit of the camera? Is this fully deployed? I guess I'm just curious since the filing mentioned it. **Lars Moravy**, Vice President, Vehicle Engineering [1:03:48] Yeah, first I want to say we did, you know, change the cameras some months ago and those are out. And the NHTSA filing is referring to like older vehicles. We always work directly with NHTSA on all of the issues that they raise with us, and they're asking for quite a bit of information, and, you know, we're complying with that in as timely a manner as possible. And so we expect to resolve that and any of the other investigations in short order. **Ashok Elluswamy**, Vice President, AI Software [1:04:13] Yeah, and we have also implemented stricter measures for the visibility of the camera. So in recent software builds, if the camera is not able to see things clearly because of, you know, residue buildup or what have you, then the FSD won't be available for those cars. **Elon Musk**, CEO [1:04:30] It just needs to, you have to clean the inside of the windscreen. **Travis Axelrod**, Head of Investor Relations [1:04:35] Great. That, unfortunately, is all the time we have today. We appreciate everyone's questions, and we look forward to talking to you next quarter. Thank you very much, and goodbye. --- Transcribed by Remount from Tesla's public webcast. Free to read, download and quote; a link back to remount.co is appreciated. Machine-assisted transcript: check the webcast for exact wording. Remount is an independent company and is not affiliated with Tesla. https://remount.co/transcripts/tesla/2026-q1