00:00The kind of big headline for me was the capital expenditures commitment. Twenty billion dollars this year. You know full well it's way beyond what they might do in a typical year.
00:10So let's start with that. You know it's clearly a signal that these things that Elon Musk has kept you guys looking to the horizon on for some time. Now it's on paper. It's time to act.
00:20Yes. Well you know I think the capital expenditures are not too surprising to us. We had fairly aggressive investment estimations in our public valuation model.
00:35But that's all to say you know I think the next five years for Tesla will be dominated by the RoboTaxi story.
00:40You know we've previously published we think this could be attributable to over 90 percent of the enterprise value for the company in that time period.
00:49And you know in order to put many vehicles on the road which is their plan they need to invest.
00:56Of course a lot of the money is going into factories AI infrastructure build out.
01:01So you know I think that the story here is that Tesla while they were you know second or behind Waymo in terms of a commercial launch for a RoboTaxi platform.
01:11They have an incredible scale that is really not matched by anyone in terms of the public announcements that they've made of putting actual vehicles on the road.
01:19Right. On TerraFab specifically you and the team at ARK know full well a fab at that scale is a fixed cost of 20 to 30 billion dollars.
01:28And the CFO was clear this is not reflected in their CapEx forecast.
01:32But there's a reason that the industry doesn't put memory logic and packaging on one site.
01:38That doesn't exist. But it is Musk's proposal. How seriously are you taking that?
01:43Well I think you know he's always been a very ambitious CEO.
01:48I would interpret this as look he's he's concerned Tesla needs a lot of chips.
01:54They have grand ambitions for AI data centers in space.
01:57We think you know that could that could be a really interesting play especially as launch costs continue to decline.
02:04It could actually be cheaper than terrestrial than data centers on Earth.
02:07So you know I think the way to interpret it is that he knows that he needs a lot of chips.
02:14We've seen him vertically integrate in the past in the electric vehicle business for instance and parts of the supply chain that he did not see popping up in the U.S.
02:23That they they needed in the U.S. So you know I think this sort of fits in with with what he's done in the past.
02:29Albeit yes it's a major announcement for Tesla.
02:32So I'd say broadly that like I would interpret some of it as a call to action that you know he is looking out there at the supply chain.
02:39But yes for now they have this very ambitious plan.
02:43And again I would focus on the at least from evaluation perspective on the robo taxi picture here.
02:49Of course they'll also use those chips for optimists. But I would focus on robo taxis.
02:54And let's focus just on what you have told the market you anticipate.
02:58If I'm right by 2029 what is it the stock will hit 2,688 percent of the company's value will be robo taxis.
03:05And you've talked about the millions of robo taxes that really could be produced by then.
03:09To that end how how integral is the XAI integration if we're going to think about integration.
03:15Is that important for the story and the two billion basically capital allocation that was made towards it?
03:24So you know of course we hadn't previously accounted for that.
03:27The way that I would think of it as you know on the call they mentioned of course they're making Grok available in the vehicles.
03:32I think the more interesting parts of the story are of course you know they could potentially share AI infrastructure investment and mutually benefit from each other.
03:40He did mention that Grok could sort of act as this like maestro for optimists and for the robo taxis in terms of you know like networking them together.
03:50And sort of being the AI control center if you will for robo taxis and any sort of like large scale optimist project.
03:58So that's how I would think about that investment.
04:01Let's talk about this robo taxi unlock then.
04:02What needs to fall into place for the 2029 moment to occur from your perspective?
04:08Because at the moment we've got just a handful in Austin that don't have someone in the driver's seat.
04:14How quickly does that scale do you think in realistic nature?
04:19Yeah so you're correct that you know there's there really are only a handful that currently have no one in the driver's seat.
04:24They did say though that they have 500 robo taxis and that they plan to double that every month.
04:30I mean if that's true if you look at Waymo's fleet the last reported number we saw was about 3,000 cars.
04:36So in other words Tesla could surpass Waymo's robo taxi fleet within three months.
04:40I mean I think that's incredible if you look at the fact that Waymo launched the service back in 2019.
04:46Right so again I would focus on the fact that this is like unmatched scale.
04:50They're a vertically integrated player.
04:51They do not have to partner with other auto manufacturers.
04:54This also gives them a cost advantage.
04:56So in the big ideas presentation that we just published you know we estimate that they have a 50 percent cost advantage over Waymo on the next generation vehicle if you compare it to the cyber cab.
05:08So this is really what matters for Tesla scaling robo taxis that competitors do not have.
05:13On top of that they have a data advantage.
05:16You know if you look at Waymo's miles we estimate they're doing around 400,000 per day.
05:20You know Tesla gets 17 million miles of FSD data per day that they can use to train the fleet.
05:27So that is something that competitors just do not have in the robo taxi front.
05:31And it's important that scale is important because we think that what will drive robo taxi adoption is a reduction in the price per mile.
05:39So today human driven ride hail costs over $2 per mile on average.
05:43We think at scale that could be profitably priced at $0.25 but the reality is there's a lot of headway in between that $2.25 to make profit.
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