EVwire brief: Tesla held its Q3 2026 earnings call, and we have put together the full transcript of the whole Q&A for you.

Here's the Table of Contents so you can jump to the topic that interests you:

Good afternoon, everyone, and welcome to Tesla's third 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 Q3 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.

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.

Thank you. So, the third quarter was very strong, and I'd like to give a big congratulations to the whole Tesla team for working hard to make it happen. Demand is growing rapidly for our vehicles. It's exceeding our production by a significant margin. And obviously, we're going to be ramping, and we are ramping production meaningfully.

The biggest driver for demand is Full Self-Driving. And today, there's really no competitor for FSD in any car that you can buy. And to be clear, we are producing and delivering as many cars as we can, and we're pushing very hard for FSD approval in additional markets. We're now approved in many countries in Europe, and we're hoping for an EU-wide approval. It's hard to predict, but maybe within a few months, but I would be surprised if it takes longer than Q1. Obviously, that's not a time frame we control, but we do anticipate being fully approved throughout Europe and many other countries.

We also began production of the Tesla Semi truck in Q3, and did the new Roadster demo, which was, I think, one of the most exciting events. I mean, arguably the coolest demo of any product ever. And that's a testament to amazing work by the Tesla and SpaceX teams.

We've also been laying the groundwork for a lot more manufacturing capacity. I think we're aiming for 5 million vehicles a year by approximately 2030, and I think we've got a good shot of achieving that goal.

Energy demand is very strong. We're actually almost sold out of all Megapacks for 2027, and we're ramping production as quickly as possible to meet demand. We also expect gross margins on that to increase meaningfully. So in a nutshell, after many years of sort of grind and things being fairly flat, I think we're now headed for a lot of fun and significant growth.

Regarding Robotaxi, we're seeing the Robotaxi miles driven, or fully autonomous miles driven, scale exponentially, meaning scaling very rapidly. And it would be hard to overstate this point. It really is an extremely fast week-over-week growth in autonomous miles, and I don't think there's any company in the world that can match our scale with autonomous vehicles as we continue to ramp. The Cybercab fleet in Austin, for example, has grown by a factor of 10 since launch about a month ago. And the cumulative mileage, when I look at the weekly chart, it's, wow. I mean, it looks like a rocket going to orbit, basically. It's growing very fast. If you want to try it out, come to Austin, and you'll see Cybercabs in use at scale in Austin, as I think a lot of people saw with the Austin City Limits concert recently. So this is really going to a very good place.

Regarding Optimus, we've started what I'd call early production on a high-volume line in Fremont. Now, I want to elaborate on this point, because I have said this before: the growth of Optimus is an S-curve, but the initial part of the S-curve has a shallow slope and is somewhat bumpy because it is such a radically new product. The way to think about it is there's like 10,000 things that have to go right for production of the robot, and it'll move as fast as the slowest, least likely of the 10,000.

We do have the vast majority of a million-unit-per-line production line landed in Fremont right now. But I would expect that it takes us probably at least a year, maybe a little longer, to get to that annualized rate, to get to 20,000 units a week. This is fundamentally because there are still parts of the design that are changing.

A lot of people ask me about Optimus. That's why I think I've got to kind of belabor this point. Because if people don't understand new technology that well, or volume production of complex new hardware that well, it sort of seems like, well, can't you just make a whole bunch of these things immediately and send them out? And it's like, no. You've got to basically build up an entire gigantic global supply chain and have, domestically, a very, very big factory, and everything's got to work.

And there's still some things we need to tweak about the design, because you need to deliver a robot that is safe and reliable and has long duration. So it can't, like, wear out after a month. And there's still quite a lot of work to do with regard to the AI in the robot for it to be truly useful for open-ended tasks.

But like I said, I would expect that the AI, the electromechanical design, the reliability, and the usage life of the robot, I do expect these issues to be solved around the end of next year. So that's the time to expect when we're delivering Optimus to companies outside of Tesla. And I remain convinced that Optimus will be the biggest product on Earth, and humanoid robots in general will be the biggest product on Earth. So Optimus is a very big deal. But I want to temper expectations that we still have a lot to get through, and it's about a year or so that it'll take us to get through all that stuff. But to the best of my knowledge, there is no one that is even close to Tesla with respect to a general-purpose humanoid robot.

Regarding the Terafab, the Austin-based research lab is progressing quickly. We'll begin commissioning machinery in the first half of next year. And hopefully, if things go well, we'll make our first test chip, just to see if we can make any chip at all, around May or June. So that's, I think, pretty exciting. And then our aspiration is to be making some kind of useful chip at volume around Q3 of 2028.

And as I've said publicly on X, the Terafab, I think, will be the most valuable building in the world and will probably have an economic value that will place it in the top 20 of countries. So it's an epic project. And this will be an incredibly important asset, if not a necessary asset, in order to scale, especially Optimus, as we can address bottlenecks in semiconductors, whether it's memory, packaging, logic, or whatever the case may be.

With regard to a potential merger with SpaceX, I think I said everything that should be said yesterday. Tap dancing through a minefield there. So yeah, that's it. In conclusion, we're super excited about our autonomy and robotics roadmap. There's a lot of incredibly awesome stuff coming, and I'd like to once again thank the Tesla team for their strong execution and all of our supporters for joining us on this journey.

Travis Axelrod: Great. Thanks very much, Elon. And Vaibhav has opening remarks as well. Vaibhav.

Thanks, Travis. We continued our progress on a lot of fronts in Q3. Elon already covered a lot of them. Additionally, what I'd like to add is we also started deliveries of Megapacks with our in-house LFP batteries, and for the first time, two consecutive quarters of vehicle deliveries of over 480,000.

On the automotive business, we exited the quarter with our highest backlog in four years, with deliveries constrained primarily by production. We're therefore focused on increasing production at all our factories to meet this growing demand. While we are actively working to increase production, it does take some time to get every aspect dialed in, from supply chain to manufacturing to delivery logistics.

The Model Y continued to outperform in the quarter and set delivery records in several key markets. Based on the preliminary data which we've gathered, we believe that it was the number one selling BEV in Europe and the number one selling passenger car in South Korea. We've also set new records in key markets, including Australia, Japan, and Taiwan.

As Elon said, FSD continues to be the key driver for demand. In Q3, over 75% of deliveries in North America included a sign-up for a paid FSD subscription at the time of delivery, which is approximately 20% higher than Q2. Overall, the FSD attach rate continued to improve, reaching over 1.7 million paid customers globally, of which, for the first time, more than 50% is based on subscriptions. Given the strength of FSD in the US, we are taking extra steps to sell certain cars in Europe with some benefits to try and get more fleet out there before broader FSD approval is obtained.

On automotive margins, excluding credits, they increased sequentially from 16.3% to 18.1%. The improvement in margins is driven by a higher mix of deliveries in APAC. While commodity price increases and interest rate changes continue to add to our cost and create further headwinds, we have adjusted the vehicle financing programs to partially offset such costs.

On the energy business, we had our second-best quarter of deployments, at 13.7 GWh of energy storage. Energy gross margins improved from 20.4% to 33.1%. The sequential margin improvement is primarily attributed to tariff refunds recognized in the quarter and warranty true-downs resulting from alignment with a vendor on certain cell-related costs to be reimbursed by them. As Elon said, the business is witnessing extreme demand from data centers, and we are doing our best to increase production. And accordingly, we'll see improvements in ASP and further improvements in margins as we move forward.

Services and other margins improved sequentially from 14.1% to 15.9%, an all-time high. This was the result of strength across several of the businesses in services and other, including Supercharging and insurance.

The Robotaxi business, which is part of services and other, continued to grow with the launch of Cybercab rides in Austin. Cumulative unsupervised miles 8x'd in the quarter, as we had weekly double-digit growth throughout the quarter. We're taking all the learnings from our Austin expansion to help us prepare for a broader Cybercab launch in other markets. Our priority is progressing the density and expansion of the network through vehicles that provide the best experience, like the Cybercab. We will also continue to augment the fleet with other variants over time to address the terrestrial transportation needs of the total population.

I'd like to stress that what we are trying to do is literally take over every part of terrestrial transportation. We're starting with getting people from one place to the other, but we want to basically own transportation of any kind on Earth.

We are in a huge investment cycle to set us up for the future. Therefore, as previously guided, operating expenses continued to increase sequentially. Most of the increase came from significant research and development-related activities, including AI development costs such as depreciation from additional compute, chip development, and pre-production ramp costs for new products like Optimus, Megapack 3, and Semi. This trend of growing OpEx will continue until we commercialize these new products.

Net income was impacted by a mark-to-market reduction of our SpaceX holding of $142 million, which was offset by a Bitcoin mark-to-market gain of approximately $290 million.

We continued our efforts to manage cash efficiently and responsibly. We ended the quarter with positive free cash flow of over $1.5 billion and an overall cash and investment balance of over $45 billion. We're revising our capex guidance to be approximately $20 billion for the current year as a result of managing our capital deployment efficiently, and we plan to fund it primarily from our cash flows from operations.

Additionally, during the quarter, we secured capacity to borrow up to $30 billion to support the expected growth in capex. Confidence in the cash generation capacity of our business and the investments we are making drove our decision to secure shorter-term financing. We don't plan to make any draws under any of the new facilities in this calendar year. The money that we received from the tariff refunds is being reinvested to expand production capacity in the US.

I'd like to stress that we like to do a lot of hardcore, real grunt work to get production facilities up and running. So our capex for the next few years will continue to expand as we add more Robotaxi fleet, expand our production capacity for Optimus, install manufacturing capacity for solar, purchase additional AI compute infrastructure, and build a semiconductor fab. This strategy will position the company for the next era of growth and disrupt many existing markets while creating new ones.

This is by far the most exciting time to be at Tesla. The foundation being laid around autonomy, robotics, and energy is setting us up for an extremely bright future. I would like to end by thanking the Tesla team, our customers, investors, and suppliers for their confidence in us on this journey.

Travis Axelrod: Fantastic. Thank you, Vaibhav. Now we're going to go to questions from Say.com.

Travis Axelrod: The first question is: "How does the Cybercab fleet scale past Austin, and what's the regulatory path outside Texas given NHTSA's open safety review?" Ashok, did you want to take that?

Ashok Elluswamy (VP for AI Software): Yeah, I'll start here. First of all, we launched Cybercab this quarter, which is very exciting. We achieved that by mostly learning from data from the other vehicle platforms, for example, Model Y, Model 3, etc. All of that data helped make the Cybercab capable without requiring a ridiculous amount of vehicles to produce the data. So we are seeing very good scaling in terms of Cybercab's capabilities.

We launched in Austin, but that's only because we had some Cybercabs and we want to swarm Austin with Cybercabs everywhere. But there's no fundamental reason that we are limited to Austin. In fact, next month we'll be launching in Dallas, and then the same software just scales to lots of other cities along with the Model Y Robotaxis.

Travis Axelrod: Great. Thanks very much. The next question is: "What are your thoughts on crowdsourcing training data for Optimus versus your internal Optimus Academy approach? Is data currently the primary bottleneck?" I think you covered this quite a bit, but any other color there?

Elon Musk: We mostly talked about this already, but crowdsourcing is not the issue for Optimus. There's a lot of things we have to get right about the AI architecture that we're still working on. We're making good progress, but that needs to be sorted out. And really, in order for Optimus to get the training data we need, we actually need to make a lot of Optimi. So we need to make, I think, on the order of 10,000 or 20,000 bots and then have them do self-play. And we're building out an Optimus Academy where Optimus can practice doing a very wide range of tasks. And then we can use that data in sort of a flywheel to make it better and better at these various tasks.

A big difference with Optimus versus the cars is we don't have this vast fleet of cars from which we can gather training data. So with Optimus, we have to bootstrap it by making the robots and having them do self-play, which is really how a human learns to navigate the world. You can see this when you have a toddler and they grow up. They initially are sort of wobbly and they don't know how to do things, and eventually they learn to wipe their own ass, which is a big milestone, as anyone who's had kids knows. And then they learn to read and do all sorts of things, and they learn this by playing. And we actually need Optimus to play at scale in order to have it be really good at tasks in the real world. And Ashok, you may want to add to that.

Ashok Elluswamy: Yeah. Like you mentioned, Elon, for the car, we actually have the data from the car's embodiment itself. But for Optimus, there's no exoskeleton for humans to get into and make Optimus into a puppet or something like that. Optimus has to learn by watching other people do tasks initially and then start practicing the task itself. For example, if you're watching a soccer game, just because you're watching it doesn't mean you'll be good at soccer yourself. You've got to start practicing and get good at the game and learn from your own experience.

We are setting up this huge reinforcement learning cycle, with initial base training done from humans to bootstrap, and then put it on Optimus and do a lot of self-play, both in simulation and in the real world, to learn on the embodiment of Optimus itself. I think we're pretty close to having very good results in this big loop.

Elon Musk: Yeah, I think we may be ready to release an Optimus video in a month or so. I want to make sure that when we release this video, it's not a canned demo. When you see these humanoid robot demonstrations, some of them look very impressive, but they're not really using any kind of advanced AI. They're pre-programmed, deterministic tasks. And if you actually try to use that humanoid robot in the real world, you would have a lot of trouble. It wouldn't work, basically. So I want to release a video where it's Optimus doing things that are not pre-programmed. I think it's maybe a month or two for that, to have a demo that's a you-can-believe-what-you-see type of thing.

And then there's another milestone that I think is important that we want to get to, which is to integrate the Tesla AI5 chip into Optimus, which, if things go according to plan, will be in approximately April of next year. That's a giant improvement in capability, with an order of magnitude more operations per second. It's an order of magnitude more compute, AI5 versus AI4. And that will help Optimus a lot, because the degrees of freedom that a humanoid robot has to deal with are far greater than what a car has to deal with. So it is a bit of a struggle to squeeze everything needed to operate with all the degrees of freedom of Optimus and the wide range of tasks. Think of a humanoid robot. It's going to do, like, a thousand times more things than a car would do. Some very big number, basically. So I think the additional compute of AI5 will make a big difference, and that comes in, hopefully, in volume around April of next year.

That's why I think all the pieces, like the refinements in electromechanical dexterity, making sure Optimus can operate for long periods of time without wearing out, getting the AI software right, and the AI5 chip integrated, all of these things kind of come together. That's why I think about a year from now is when it's something that you could ship to customers, and it would also be reaching scale in production. So that's probably the right timing to think about.

In terms of the initial customers for Optimus, I think it would probably be industrial applications at first. Things like dangerous, repetitive tasks, things that people really don't want to do, and that you want done basically 24/7. So around-the-clock stuff, that's going to be the highest value for Optimus in the beginning. As we scale production, of course, it would be something that people can buy for their home. But the initial highest-value use, I think, will be heavy industry, dangerous tasks, or things that may cause repetitive stress injuries and that you want done 24/7. So that's the way to think about it.

Travis Axelrod: Great. Thank you, guys. The next question is very similar. It's about Optimus scaling, so we can go past that one.

Elon Musk: Yeah, we just answered that one, basically.

Travis Axelrod: And the next question is: "When can we anticipate FSD Unsupervised in customer cars?" Ashok, did you want to kick that off?

Ashok Elluswamy: Yeah, like I mentioned earlier, the software for Cybercab and Model Y is the same, and pretty soon we'll be able to release the same software as part of the V15 release to customers. The only additional requirement is making sure that, for example, the customer Model Ys can be part of the geofences and the fleet management that Tesla has for it to be fully autonomous. We suspect somewhere around Q2 next year is when we can turn on some of the first customer vehicles to be part of the Robotaxi fleet.

Travis Axelrod: Great. Thank you, Ashok. The next question is: "When will the Cybercab be available for customer purchase and ownership?" Lars, did you want to kick this one off?

Lars Moravy (VP for Vehicle Engineering): Sure. Thanks, Travis. I think it builds a little bit on what Ashok just said. But in short, we're trying to get Cybercabs to customers by the end of this year, 2026. Obviously, we're producing them on our line in Texas, but all of those are currently going to our own internal Robotaxi fleet. And as Tesla grows, we'll mainly deliver fully designed autonomous vehicles to our customers, and Cybercab will be the first. So as we start small this year and we learn about all the things that Ashok mentioned about delivery and ownership and fleet management of autonomous vehicles in customer hands, we'll continue to scale that. Elon, I don't know if there's anything you want to add to that.

Elon Musk: No. I mean, Cybercab is primarily going to be something that is offered as transport as a service, whereas our other cars would be more the cars that you'd want to own, like the 3 and the Y and whatnot, and Roadster, obviously. But the vast majority of the Cybercab stuff will be essentially Tesla-owned and transport as a service.

Travis Axelrod: Great. Thanks, guys. The next two questions are quite similar, around unit economic costs. The first one is on cost per paid Robotaxi mile, and the second one is cost per Optimus unit. And we already covered what the first paying customer looks like. So Vaibhav, did you want to get into the unit economics question here?

Vaibhav Taneja: Yeah. So on the Robotaxi side, in the main geographies where we are operating, we're already seeing utilization improving. And week by week, as Elon was talking about, we look at the miles and how many paid rides are happening. So are we at our goal of 30 cents today? No. But do we see a path to get to that? Yes, we do. And it's all about scaling operations.

Today, Cybercab, which is the primary Robotaxi product, is available only in Austin, but we do plan to bring it out in some other cities before the end of this year. And as we add more Cybercabs, we are also learning from the operational experience of managing a fleet: pickup and drop-off, cleaning, all those things. So all those costs are being dialed in, and that's why, like I said before, we definitely see a path to get to our 30-cent target.

Travis Axelrod: And then did you want to cover the Optimus costs?

Vaibhav Taneja: Yeah. I mean, on Optimus cost, internally, we are tracking pretty well in terms of how the design has matured, but it would be a little too early to say that we have got there, because, like Elon was saying, we're still making a lot of design iterations. The good thing is, when you look at it from a cost perspective, we're trending closer to where we would say our Cybercab cost would end up being.

Travis Axelrod: Great. Thank you very much, Vaibhav. The next question is: "When do you anticipate Optimus will be generating revenue?" We've kind of already answered this, so we covered that in the prior question.

Travis Axelrod: The next one is: "Mapping for FSD continues to be a problem. The three biggest issues are recognizing proper speed limits, parking, and typical routes. I understand you use various third-party maps, but why not use your own maps? Authorize trusted and verified Tesla owners to provide the input." Ashok, did you want to kick off here?

Ashok Elluswamy: Yep. Yeah, you're totally right that we shouldn't be depending on external people's maps. So we are building our own maps, but not the same way as Waymo maps. We're building an entirely new architecture with essentially AI-based mapping and navigation. It's going to be super awesome. It's going to be integrated with voice. You can talk to it, ask for different routes. It's going to learn your personalized preferences, plus also the fleet preferences. The collective intelligence of all the cars is going to flow into making the maps and navigation super cool.

You'll see the start and end of trips already use this technology pretty soon as part of the V15 release. And over the next several months, it's just going to take over all of the navigation functions: parking, destination handling. We'll know you better than you know yourself in some regard for the driving task, and handle it fully.

Travis Axelrod: Great. Thank you, Ashok. And then our last question is: "What is the current production rate at your existing factories? Do you anticipate building new ones?" Lars, did you want to kick that off?

Lars Moravy: Yeah, sure. I think Vaibhav kind of touched a little bit on this in his opening remarks. Our factories are operating at record rates this quarter, and of course, they can only build at the rate of the least likely process or component. And Vaibhav mentioned that we are actively managing all the aspects of production. As we've spoken about in our past calls, we've made strategic investments globally to increase rates at our current factories over the last year-plus, and this quarter, we are starting to see that, and we expect that to continue in coming quarters as those investments come to fruition.

Beyond that, we're also working to ramp Cybercab, obviously, in Giga Texas, and we applied for the proper permits to expand the factory in Berlin. And as Elon mentioned, we just started our new Semi factory in Reno. So in short, we are building new factories, yes. And we're aiming to hit that 5 million goal by 2030, as Elon said.

Travis Axelrod: Great. Thank you very much. That's it for the Say.com questions. Now we will be going to analyst questions. As a reminder, as Elon said, we will not be addressing any questions today on a potential merger with SpaceX. With that, the first question comes from Tom from RBC. Tom, please unmute yourself when you're ready.

Tom (RBC): Yeah, thanks for taking the question. It's on FSD. So the attach rate, I think, according to my math, is like 30% to 40% in North America on a paid basis. It's becoming a flywheel, as you said, for more car sales, and the attach rate exceeds other automakers' subscription-based autonomy by a lot. I guess, in a weird way, could you guys be a victim of your own success, with other carmakers noting the success and trying to aggressively come up with similar L2+ type products, maybe partnering with NVIDIA or Qualcomm? And if that happens, could that be deflationary for FSD pricing?

Vaibhav Taneja: I think people take this thing very simply, that if the software can be solved, it's there. It's not, because... I'll let Ashok get into it, but basically, it's a very hard problem.

Ashok Elluswamy: It's a super hard problem. Yeah, it's easy to get to the first 90% and make a cool-looking demo, but when you get into the long tail of this problem, it's so long that people don't realize. Anyone in their sane mind should not attempt to solve this problem. It's so difficult and so long-tailed, especially to get to a safety point where you can drive safely for millions of miles with no injuries and so on. That's going to be extremely hard. As we release unsupervised FSD to the broader customer fleet, I don't think anyone can match it in several years.

Vaibhav Taneja: And one other thing, which I'll say if it wasn't clear: especially in our showrooms here in the US, customers are now coming in and saying, "Can we get into an FSD drive?" They're not asking for a 3, Y, or Cybertruck. They're saying, "Can we get an FSD drive?" And that has become the key driver, because what it does is it actually opens up a lot more flexibility for different parts of the population who had issues driving conveniently before. Now they're getting their freedom back by being able to use FSD, and a lot of folks are just like, I mean, it's a game changer. If you haven't tried it, I keep saying it every time: if you do it, you won't be able to go back to driving any other car.

Tom: No, I get it.

Travis Axelrod: Do you have a follow-up?

Tom: Yeah. The follow-up is similar to that question, on China. It seems like autonomy is table stakes there. Is it the same kind of answer on this question, that those carmakers aren't going to be able to develop similar products to what you guys have with FSD? Or do you see there being a different pricing dynamic there?

Vaibhav Taneja: I mean, at the beginning, the leapfrog which we have in terms of this technology isn't there with any of the other Chinese OEMs today. And we're working very diligently to try and get broader FSD approval in China. It is hard, but for certain cars, we have been able to have FSD operating, and whoever has tried it there understands how much better it is compared to any of the competition. In fact, I don't know if you've seen this, but there have been some competitor CEOs who have come and done FSD drives here in the US, and they themselves have been blown away by what FSD is capable of doing. So it is a similar answer.

And again, we're not taking it lightly. We're actively working with the regulators in China. I don't know if you saw this, but we've released our safety report on FSD before, and we've also released our unsupervised, or Robotaxi, safety report. We just think this is the right way to get people into a safe environment, because of the amount of accidents which happen because of drivers not being alert. This is the only way we can ensure that there are fewer casualties in the world, and for any regulator who looks at the data, it would be very hard for them to refute it.

Travis Axelrod: Great. Thanks so much. Our next question comes from Emmanuel from Wolfe. Emmanuel, please unmute yourself.

Emmanuel (Wolfe Research): Great, thank you. Hi, team. So on Robotaxi, you've talked about sustaining double-digit week-over-week growth in unsupervised miles. I'm curious if there's a way to triangulate that for us into revenue and maybe profitability of the Robotaxi business. If you sustain, let's say, 15% week-over-week growth in these miles, you'll probably cross 10 million miles by the end of the year. How many miles would you need to generate gross profit?

Vaibhav Taneja: I mean, I think Elon talked about this a little bit at the beginning: using exponential math, this would become a significant part of our revenue and profitability in '27.

Elon Musk: Yeah. I wouldn't say it's going to move the needle this quarter, but I think it starts to become noticeable probably in Q2, and then probably a big deal by Q3 or Q4 of next year.

Vaibhav Taneja: Exactly.

Emmanuel: Got it. And then if I think about it in terms of fleet size, I think your Cybercab line capacity is listed at more than 125,000 units a year. Production just recently started. How do you expect the ramp-up curve to be on the Cybercab line?

Vaibhav Taneja: I'll kick it off, but then I'll also let Lars chime in. I would give kudos to the engineering team. They have designed a product... because not only do I talk to the engineers, I also talk to the manufacturing guys, and they think this is one of the easiest products for them to scale in terms of manufacturing. So scaling would not be that much of a challenge. I think the key thing which we're trying to make sure of is that we have all the regulatory approvals, where we can start deploying the Cybercabs as fast as we can produce them. And again, Lars, feel free to chime in.

Lars Moravy: Yeah, thanks. I appreciate the accolades. The team definitely crushed it on the Cybercab design and manufacturing. Just to your point, we have 50% fewer parts than any other vehicle we've ever built, so that's 50% fewer things to go wrong. We've definitely been bursting the Cybercab line to see how fast we can run it. I think the listed capacity is more of the rate at which we're capable of running today, but the actual capacity of that vehicle line is significantly higher.

Right now, we're building at the rate that the Robotaxi service needs the vehicles. And I'll say Ashok and I are in a bit of a race of who's going to stay ahead. He's got exponential growth coming on the miles month over month, and we're going to look to meet that as well with the vehicle production.

Travis Axelrod: Great. Thanks, guys. The next question is going to come from Andrew from Morgan Stanley. Andrew, please unmute yourself.

Andrew (Morgan Stanley): Great. Thanks so much for taking the question. I want to start on your energy business. You're clearly seeing a lot of demand on the energy storage or Megapack side, and you've got some goals to bring on your own solar manufacturing. But I was just hoping to get a little bit more insight in terms of how you're thinking about Tesla's role in enabling both distributed power, but also distributed compute. I think last quarter, you alluded to a Megapod product. So just hoping to get a little bit more insight in terms of what you're envisioning there and, ultimately, how big this could be for Tesla.

Elon Musk: I think it's still early days on that front. We don't know the full extent of how that'll unfold. I think we'll have a better sense for that probably in maybe Q1 or Q2. It does have a lot of potential. It's just hard to say how much potential right now.

Andrew: Okay, understood. And then maybe just a follow-up on Robotaxi. It does seem like you've kind of hit an inflection point here in Austin over the last month or so since you launched the Cybercab. So would you generally say the bottlenecks to growth at this point are more regulatory-driven as you think about expanding into new geographies, and that you've kind of gotten through most of the hurdles on the software side? Just kind of curious how you would generally categorize some of those growth hurdles in some of the incremental regions you're planning on scaling into over the next few months.

Vaibhav Taneja: I think there are still certain software challenges which we are still working through. Ashok talked about it, so maybe Ashok...

Ashok Elluswamy: Yeah. For example, we initially had the Robotaxi service from 6 a.m. to 9 p.m., and then we expanded to 10 p.m., 11 p.m. Now it's going to be, pretty soon, 2 a.m. So we're slowly expanding the availability of Robotaxi, and that is driven by the capability of the AI software. And we just want to make sure that there's not a single safety incident. That is our operating principle. Even if there's the slightest possible risk at all, we don't take on that risk. So we are very risk-averse in that sense, as in we want zero injuries or anything bad happening, and that is the driving principle.

And over the rest of this year, we'll unlock 24/7 operation, go to higher-speed roads, and we think all of that is necessary to scale and offer a great product to a lot of users. That's why we wanted to do both the breadth-first of doing multiple cities, we're in six cities now, and also the depth of having a lot of vehicles in a single city, which is Austin. We'll expand to more weather conditions, day and night conditions, highways, and high speeds, and all of that will be done hopefully by the end of this year, at which point you will see a lot more scaling and a lot more cities being covered by Robotaxi. So it's not purely regulatory. It is technology-driven, but we do see that pretty quickly becoming regulatory, perhaps in the Q1, Q2 time frame.

Travis Axelrod: Great. Thanks, guys. The next question is going to come from Edison from Deutsche Bank. Edison, please unmute yourself.

Edison (Deutsche Bank): Great. Thank you for taking our questions. First, I wanted to ask about Terafab. I know, Elon, you mentioned that you had an aspirational goal of Q3 '28. Do you have a sense of how much capital needs to be invested to get there? And also, what kind of milestones should we be on the lookout for on the way there?

Elon Musk: Well, it's going to be some pretty significant capital. It's certainly in the tens of billions for Terafab. Although we've got to figure out what the relative split is between SpaceX and Tesla in terms of who pays for what at Terafab. But it's not going to be less than tens of billions in capital equipment up through early 2028, and then it'll be a lot more. It'll probably be north of $100 billion long term.

Vaibhav Taneja: Yeah, and I'll just add: for the first set of equipment for the fab which Tesla is building, we've actually already placed most of the orders. And that's why, when Elon was talking about the middle of next year, that is for the first fab, which is the...

Elon Musk: The research fab.

Vaibhav Taneja: Yeah.

Elon Musk: That's just us figuring out how to work the equipment type of thing. But real production would be late '28, which is lightning fast by fab standards.

Edison: Understood. And then just a quick follow-up on Optimus. I know you mentioned that we could see a video soon. There's quite a bit of progress, but you're still making some refinements. Generally speaking, where do you see most of the design changes still happening going forward? Is it still the hand that's an issue? Anything you can call out there?

Elon Musk: Yeah, it's mostly dexterity. I mean, Konstantinos, why don't you answer this question?

Konstantinos (Optimus Engineering): So, the hand is one of the most challenging hardware areas, actually. Most of the electromechanical system, I would say, is relatively high-confidence, meaning that it has converged to something that works decently well. The hand, from an electromechanical point of view, is more complicated than the actuators for the locomotion system, for example. Also, there are some bespoke gears that are carrying a lot of the burden for consumption and for reliability that we are still developing.

Elon Musk: Yeah, it's mostly the hand, and just the fine-tuning of the hand design, and the fingers especially. It's a hard problem, because humans have self-repair. Our body repairs itself, but robots don't. And our fingers are kind of squishy and have lots of sensors in our skin. It's hard to make a hand that can handle lots of wear and tear but is still squishy enough to pick up delicate objects, and has all the sensors, and doesn't damage the sensors when you do repeated actions. There's a lot of little things where you realize what an incredible thing the human hand is at the end of the day. So it's mostly, from an electromechanical standpoint, the hands. There are other things that are improving as well throughout the robot, but that's the main thing.

And then, as I mentioned, upgrading the onboard intelligence of the robot with AI5, which is a big step change in intelligence, will help a lot with the capabilities of Optimus. I've said before that humanoid robots will be the biggest product on Earth, and its usefulness will be, as a rough approximation, a multiple of the electromechanical dexterity, the AI software, and the AI chip hardware. And all three of those things are improving exponentially. I think we use that word a lot. The value is roughly those three things multiplied by each other, and then the Optimus robots will build the future Optimus robots, so you have a recursive function. When you have a recursive, multiplicative exponential, things will really grow extremely fast. They may start from a small base, but they're going to grow to crazy levels, and I think at some point, there will be more humanoid robots on Earth than there are humans.

Travis Axelrod: Great. Thanks so much. The next question comes from Alex from Bank of America. Alex, please unmute yourself.

Alex (Bank of America): Hi, thanks for taking our questions here. I guess just first on Robotaxi. It looks like for Robotaxi, you're pricing lower than competitor ride-share and other Robotaxi players in most markets. Is that the plan longer term, to take market share given some of your structural cost advantages?

Vaibhav Taneja: Yeah. I mean, remember, when you're comparing us with ride-share, which has a driver in there, and we don't. Plus, we are manufacturing the car ourselves. So our cost basis overall is different. I think I said it in my opening remarks, and I'll say it again, I just don't want to be too repetitive, but basically, our goal is to take over any kind of transportation.

Elon Musk: I mean, unless we're stopped by governments, which is certainly a possibility, like if they're trying to protect a domestic industry, I think Tesla will end up doing a majority of all passenger miles on Earth in any country where it is allowed to operate freely.

Vaibhav Taneja: Yeah.

Elon Musk: And you can come back and look at this prediction, but I feel confident about this prediction.

Alex: Really helpful. And then just my follow-up question, on the key metric here, unsupervised miles driven. I think it grew at a high-teens weekly growth rate since late July. Is this still the expectation, that you'll continue to grow that at a double-digit weekly rate through the balance of the year? And then what is really enabling that type of growth? It seems like you've definitely hit a comfort level and are scaling much more rapidly. How much of that is Cybercab? How much of that is better safety validation with the latest version of FSD? And then just on fleet composition, do you expect Cybercab to represent a majority of the Robotaxi fleet over time?

Ashok Elluswamy: Yes, we will continue the scaling for the foreseeable future. We don't see any hurdles along the way. Obviously, there's work required, but we do see a clear path towards scaling to millions of vehicles over the next several months. This is happening primarily due to the technology investments we have made over the last several years, and also the V15 stack that we alluded to earlier this year.

All of the foundation is hard to see. It's like an iceberg. People only see the tip of the iceberg, but there's a ton of work that goes into it. And now we're starting to see the payoff of all that work, of developing end-to-end neural networks, learning from humans, and so on. All of that is paying off. So you're seeing the result of many years of work. It didn't just happen in the last several months. And the same technology should scale to millions of vehicles, wherever we are allowed to operate.

Travis Axelrod: Great. Our next question is going to come from Pierre from New Street. Pierre, please unmute yourself.

Pierre Ferragu (New Street Research): Thanks for taking the question, guys. I just wanted to come back to... I'm really fascinated by 75% of US cars selling with FSD. And the interesting thing is, if you get the cars, they probably generate on sale, the day they sell, about $7,000 of gross profit. But then, of course, FSD generates more than $1,000 a year. And so it makes a minimal impact on numbers in the quarter the car is sold, but over the lifetime of the car, it probably at least doubles the profit per car. And so the place I want to get to is, am I looking at it the right way? And are you at some point going to disclose for us the annual recurring revenue that FSD represents? I did my own math, and I'm thinking it's probably now approaching a billion dollars. Is that the right order of magnitude?

Vaibhav Taneja: Yeah, I think the numbers which you shared are correct, and as it scales further, we will start sharing more metrics around FSD, not just the revenue, but also other key metrics around it.

Pierre Ferragu: Okay. And as a quick follow-up, do you have a good sense already, and can you tell us about, the retention rate? How many people, three or six months down the line, stick to the monthly subscription, and do you see a percentage of drivers falling off?

Vaibhav Taneja: Yeah. Like I said, we will share more metrics around churn rates and whatnot. But the reason we're not doing it at this stage is there are a lot of things which we're doing, especially with new countries being added, and then we offer free trials. And one thing which I'd also like to make clear: when I say that in North America, there's more than a 75% attach rate at the time of delivery, every car which we're delivering comes with a month of free FSD subscription, and still people are signing up even though they have that free month available.

Travis Axelrod: Great. Our next question is going to come from Colin at Oppenheimer. Colin, please unmute yourself.

Colin Rusch (Oppenheimer): Thanks so much, guys. Elon, can you talk about the strategy around ramping Optimus production a little bit to start training, even if the hands aren't fully baked with the final design? It seems like there's a lot that you could end up doing in terms of the training cycle and maturing some of the simulation technology, even without perfected hands.

Elon Musk: Well, that's what we're doing. We're building robots that do not have perfected hands, and we are making progress with Optimus training and ironing out all aspects of the supply chain and the production system. So we're doing all these things in parallel: this giant production line at our Fremont factory, a massive supply chain, and then fine-tuning the design and engineering simultaneously with the AI software. So all these things are happening simultaneously, and we're going as fast as humanly possible here. In fact, I'd be stunned if anyone has a robot that is remotely competitive with Optimus when we start delivering it to customers, which is likely to be towards the end of next year.

Vaibhav Taneja: Yeah, and you should know that not only the Fremont factory, we've also started constructing a factory here in Austin, which would be able to do a lot more robots compared to the Fremont one. So going back to what Elon was saying, we're doing whatever we can. We're not stopping. We're just going at the fastest pace we can.

Elon Musk: Yeah, we're definitely, as they say in Vegas, betting on the come.

Colin Rusch: Awesome. And then in terms of semicap capacity availability, can you talk about how you're navigating that with the suppliers? Obviously, seeing some deposits get put down on equipment and getting deliveries moving forward is a net positive on Terafab, but are there some more aggressive things that you can do to start getting ready for the larger ramp now, and how should we think about that flowing through the capex budget?

Elon Musk: It's not a massive impact right now. I think our capex is actually ending up being a little lower than we anticipated. But you'll see it become more meaningful next year, and then noticeable, in the tens of billions, in '28.

Travis Axelrod: All right. We are coming up on time here. We appreciate everyone's questions, and we look forward to talking to you next quarter. Thank you very much, and goodbye.

Here's Tesla's recording of the third quarter 2026 earnings call:

Source: Tesla

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