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- We like to too.
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Okay, welcome guys.
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Hello, everyone, thank you for joining me here today.
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I'll be your kind of post moderator, Ben Sullins.
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I have a show called Teslanomics,
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if you guys are new here and unfamiliar.
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For everyone else that does know, that is in Crowdcast.
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Make sure to go ask your questions,
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up vote questions, and all that.
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I do have, we will be restreaming the broadcast,
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once it begins, which is set for 2:00, 12:00,
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sorry 2:30.
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I have it in the back of my ear,
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so I'm waiting for them to come on.
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So, when that happens you know that's where,
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that's what we'll jump over to,
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and I'll kind of be quiet during the duration of that,
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but Tesla just did release the new update letter.
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And so, I just wanted to go
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through some of those talking points with you real quick.
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First and foremost let me just take a look and see,
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what it has, too, too, too, too.
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I had it in the other screen.
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There it is, okay, Tesla second quarter update 2018,
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Q2 automotive gross margin increased to 20 percent
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20.6 percent GAAP and 21 percent non GAAP.
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I think that's pretty amazing.
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Those were some of the things that we
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really needed to be looking for
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was an increase in the margin,
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because that is where, how they're gonna actually end up
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being profitable down the road.
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Next, you have the Model 3 gross margin,
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turned to slightly positive in Q2,
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expecting roughly 15 percent in Q3,
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so that's good, that's the direction that we want
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the margin and everything to be headed,
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because that will lead to profitability.
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Then you have the next bullet
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here on the update letter
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expecting to produce 50 to 55,000 Model 3s in Q3.
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Delivery should exceed that.
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So, if you just go back a year ago,
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and see what they were doing,
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it's pretty, it's pretty wild,
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to see kind of how far they've came,
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how far they've come on this.
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So, that's just an astounding number
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if you've been with Tesla for a while,
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and you know kind of
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what they're normally producing.
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So, there you go.
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They did a major cost restructuring in Q2,
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and they have $2.2 billion of cash
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and cash equivalents at the end of Q2,
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and they're expecting to grow in Q3 and Q4.
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So, remember that's the big equation right?
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If you run out of cash that's where things will go bad.
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So you can, you know you can be taking on date.
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You can be spending and expanding your business,
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and doing all these things
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as long as you still have cash in the bank,
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which you're getting from either financing operations,
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or you know divesting some of your assets,
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which doesn't typically happen.
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So, the last bullet on the update was a CAPEX projection
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in 2018 adjusted to less than $2.5 billion,
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meaning that they're gonna be spending less money
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on new things that they need to do
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to kind of scale this and grow.
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So, some other notes that I thought were interesting.
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The Model 3 according to their letter here
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in July of 2018 the Model 3 not only had
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the number one market share position
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in its segment in the US,
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it outsold all other mid-size premium sedans combined,
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accounting for 52 percent of the segment overall.
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The popularity of the Model 3
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is a true testament to the product.
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Based on trade ins they've received so far,
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they can see that the total addressable market
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for the Model 3 is much larger
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than mid-sized premium sedans.
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We are drawing customers from many other segments
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including non premium sedans and hatchbacks.
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So, the reason I bring that up,
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because I think that is extremely interesting,
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because what I think, what you're gonna see,
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is you're gonna see a lot of people that weren't BMW
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or premium car owners already coming into this space,
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and you know this would be the most expensive one
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that they'll ever purchase.
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So, that's what they mean
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by expanding the market segment,
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and I think that's tremendous.
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They went on to talk about how some of the things,
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these things are produced,
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and one of the things that they're talking about here
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are that they're now producing,
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or they have multiple times in July
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achieved 5,000 per week milestone.
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We will now continue to increase that further
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with our aim being to produce 6,000 Model 3 vehicles
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per week by late August.
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We then expect to increase production
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over the next few quarters beyond 6,000 per week
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while keeping additional CAPEX limited.
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So, that's the thing, right?
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If you just wanted a big number
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of how many can you actually,
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how many cars can you actually produce?
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Then yeah you could just kind of
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just keep having that number go up and up and up and up
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by spending more.
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So, what they're saying is that they're gonna try to do it
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in a capital efficient way,
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meaning not spending much more money,
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but still increasing production,
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so that way they'll you know
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be a kind of a bigger margin on those dollars coming in.
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Now they also state that they aim to increase production
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to 10,000 Model 3s per week as fast as we can.
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Notice they took off the date
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of when that might be possible.
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I and many others still believe that this will be something
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that we'll see in 2019 maybe,
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but not something that you're gonna see
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very, very kind of soon.
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Best guess, 2019.
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Could be even even kind of beyond that.
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So, they also said that they are trying to get GA3,
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which is the main general assembly line in Fremont
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to produce 5,000 Model 3s per week,
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and then GA4 the one out in the tent,
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would be in addition to that.
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So, that means that there are
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some changes that they need to do.
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And so, I'll just bring that up here it says,
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to address the short-term issues with GA3, we built GA4
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to help us reach our 5,000 units per week target earlier,
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and ultimately to push us past that point.
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We were able to build the GA4 quickly,
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due to the design simplicity of the Model 3 architecture,
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and because it's a tent.
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Okay, the layout and processes of GA4
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are similar to those of the Model S and X assembly line,
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while the quality and cost of production are roughly equal
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to those of GA3.
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General assembly excluding the cost of components
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accounts for approximately three percent of Model 3 cost.
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The rest of our manufacturing processes
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remain highly automated,
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including stamping, body, welding, paint shop,
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powertrain assembly, and battery pack assembly.
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I thought that was pretty crazy to see that it,
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that it's only three percent of the overall cost.
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To me, I just, it seems like the assembly of it
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is such a huge part of the process.
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Yeah, it's wild to that that only accounts
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for that small percentage there.
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So, they also stated in this that
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they're now selling the performance Model 3,
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which you've seen a lot of,
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you've heard a lot of, and that the,
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at the end of July, Gigafactory 1 battery production
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reached an annualized run rate
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of roughly 20 gigawatt hours,
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making it the highest volume battery plant in the world
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by a significant margin.
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Consequently, Tesla currently produces more batteries
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in terms of kilowatt hours
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than any other car makers combined.
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I don't know if that's a big achievement.
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Not many other car makers are purely electric
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and selling at this high volume.
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It just doesn't, it's just not happening.
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so you know, that, I don't know.
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Yeah, you're the best of you know,
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the only one in the industry.
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So in Q2, they said that we've produced a 53,339 vehicles
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and delivered 22,319 Model S and X vehicles,
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and 18,449 Model 3 vehicles,
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totaling 40,768 deliveries.
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Now remember, they were able to push out
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the 200,000th car being delivered to Q3,
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so that was a big milestone,
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because now that means the tax credit at least in the US
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is gonna be extended.
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So, that's a big news,
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and I think we're gonna see even bigger stuff
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happening in Q3,
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because a lot of people kind of be you know,
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basically saying that they're sandbagging
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on their deliveries in order to maximize that,
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which makes makes a whole lot of sense.
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Now, there's some comments here about the energy side.
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They said while we are largely focused
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on the Model 3 ramp in Q2,
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our energy business grew as well.
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Demand for our energy storage products
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remain significantly above our production rate,
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even as we gradually add capacity.
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Overall, we expect our energy business revenue
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to improve in the second half of this year.
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And I bring that up, because I know a lot of people
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are waiting on the energy products.
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So, it's good news that that stuff is happening,
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and that the people I've spoken to a Tesla about this
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all agree that it's, you know,
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it's important for them and it's going up,
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and they're working on it.
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So, if you have a power wall,
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you're waiting on a power wall, something like that,
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I think you know hopefully
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we'll start to see some deliveries
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and some changes to that down,
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down in the future here.
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Okay, so that kind of ends the update letter there.
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There's a lot more tidbits in there,
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but well of course we're gonna,
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we're gonna get into the call here.
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And so, let me switch over and just make sure.
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I'll take some questions now from Crowdcast
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while we're waiting.
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And guys, give me a thumbs up if the audio and video,
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and everything looks good.
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I am on a new set up here with crazy high performance,
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so it should be should be pretty solid.
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And then of course like I said,
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I have the actual webcast in my ear,
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so as soon as that starts,
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or you know even a couple minutes before,
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I'll switch over and then I'll shut up,
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so he doesn't have to listen to me yammer.
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Okay, let's see.
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Going to the questions on Crowdcast.
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Liz asked, have you heard when the autopilot self-driving
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beyond level two is planned?
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I don't think that you're gonna see that anytime soon.
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I think that honestly autopilot
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or self-driving beyond level two
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is something maybe five years from now
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will actually be a reality.
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There may be little nuances and additional features,
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but I think you'll still see a hands on system
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that requires the driver to pay attention
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and isn't truly beyond level two.
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Level three I think is actually kind of a scary one,
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so I'm a little mixed on that.
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I think what we ought to do