Prepared Remarks:Travis Axelrod -- Head of Investor Relations
Good
afternoon, everyone, and welcome to Tesla's second-quarter 2024 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 Q2 results were announced at about 3:00 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. [Operator
instructions] Before we jump into Q&A, Elon has some opening
remarks.
Elon?
Elon Reeve Musk -- Chief Executive Officer and Product Architect
Thank
you. So to recap, we saw large adoption and acceleration of EVs and
then a bit of a hangover as others struggled to make compelling EVs. So
there have been quite a few competing electric vehicles that have
entered the market and mostly, they have not done well, but they have
discounted their EVs quite substantially, which has made it more a bit
difficult for Tesla. We don't see this as a long-term issue, but really
as fairly short term.
And we still obviously firmly believe that
EVs are best for customers and that the world is headed for a fully
electrified transport, not just the cars, but also aircraft and boats.
Despite many challenges, the Tesla team did a great job executing and we
did achieve record quarterly revenues. Energy storage deployments
reached an all-time high in Q2, leading to record profits for the energy
business. And we're investing in many future projects, including AI
training and inference and great deal of infrastructure to support
future products.
We won't get too much into the product road map
here because that is reserved for product announcement events. But we
are on track to deliver a more affordable model in the first half of
next year. The big -- really, by far, the biggest differentiator for
Tesla is autonomy. In addition to that, we have scale economies and, I
think, we're the most efficient electric vehicle producer in the world.
So
this -- while others are pursuing different parts of the AI robotics
stack, we're pursuing all of them. This allows for better cost control,
more scale, quicker time to market, and a superior product, applying not
to -- not just to autonomous vehicles, but to autonomous humanoid
robots like Optimus. Regarding full self-driving and Robotaxi, we've
made a lot of progress with full self-driving in Q2. And with version
12.5 beginning rollout, we think customers will experience a step change
improvement in how well supervised full self-driving works.
Version
12.5 has five times the parameters of 12.4 and finally merged the
highway and city stacks. So the highway stack at this point is pretty
old. So often the issues people encounter are on the highway. But with
12.5, we finally merged the two stacks.
I still find that most
people actually don't know how good the system is. And I would encourage
anyone to understand the system better to simply try it out and let the
car drive you around. One of the things we're going to be doing just to
make sure that people actually understand the capabilities of the car
is when delivering a new car and when picking up a car for service to
just show people how to use it. And just driving around the block.
Once
people use it, they tend to continue using it. So it's very compelling.
And this, I think, will be a massive demand driver, even unsupervised
full self-driving will be a massive demand driver. And as we increase
the miles between intervention, it will transition from supervised full
self-driving to unsupervised full self-driving, and we can unlock
massive potential in the fleet.
We postponed the Robotaxi product
unveil by a couple of months where it's shifted to 10/10, to the 10th of
October. And this is because I wanted to make some important changes
that I think would improve the vehicle -- the sort of -- the Robotaxi --
the thing -- the main thing that we're going to show. And we're also
going to show up a couple of other things. So moving it back a few
months allowed us to improve the Robotaxi as well as adding a couple of
other things for the product unveil.
We're also nearing completion
of the South expansion of Giga Texas, which will house our largest
training cluster to date. So it will be an incremental for 50,000 H100s
plus 20,000 of our hardware for AI5 at Tesla AI computer. With Optimus,
Optimus is already performing tasks in our factory. And we expect to
have Optimus production Version 1 and limited production starting early
next year.
This will be for Tesla consumption. It's just better
for us to iron out the issues ourselves. But we expect to have several
thousand Optimus robots produced and doing useful things by the end of
next year in the Tesla factories. And then in 2026, ramping up
production quite a bit.
And at that point, we'll be providing
Optimus robots to outside customers. That will be a production Version 2
of Optimus. For the energy business, this is growing faster than
anything else. This is -- we are really demand constrained rather than
production constrained.
So we're ramping up production in our U.S.
factory as well as building our -- building the Megapack factory in
China that should roughly double our output, maybe more than double --
maybe triple potentially. So in conclusion, we're super excited about
the progress across the board. We're changing the energy system, how
people move around, how people approach the economy.
The
undertaking is massive, but I think the future is incredibly bright. I
really just can't emphasize the importance of autonomy for the vehicle
side and for Optimus. Although the numbers sound crazy, I think, Tesla
is producing at volume with and supervised MSD essentially enabling the
fleet to operate a giant autonomous fleet. And it takes the valuation, I
think, to some pretty crazy number.
ARK Invest thinks, on the
order of $5 trillion, I think they are probably not wrong. And long-term
Optimus, I think, it achieves a valuation several times that number. I
want to thank the Tesla team for a strong execution and looking forward
to exciting years ahead.
Travis Axelrod -- Head of Investor Relations
Great. Thank you very much, Elon. And Vaibhav has opening remarks as well.
Vaibhav Taneja -- Chief Financial Officer
As
Elon mentioned, the Tesla team rose to the occasion yet again and
delivered on all fronts with some notable records. In addition to those
records, we saw our automotive deliveries grow sequentially. I would
like to thank the entire Tesla team for their efforts in delivering a
great quarter. On the auto business front, affordability remains top of
mind for customers and in response, in Q2, we offered attractive
financing options to offset sustained high interest rates.
These
programs had an impact on revenue per unit in the quarter. These impacts
will persist into Q3 as we have already launched similar programs.
We're now offering extremely competitive financing rates in most parts
of the world. This is the best time to buy a Tesla.
I mean, if
you're waiting on the sidelines, come out and get your car. We had a
record quarter on regulatory credits, revenue as well. On net, our auto
margins remained flat sequentially. It is important to note that the
demand for regulatory credits is dependent on other OEM's plans for kind
of vehicles they are manufacturing and selling as well as changes in
regulations.
We pride ourselves to be the company with the most
American-made cars and are continuing our journey to further localize
our supply chain, not just in the U.S., but in Europe and China as well
for the respective factories. As always, our focus is on providing the
most compelling products at a reasonable price. We have stepped up our
efforts to provide more trims that have estimated range of more than 300
miles on a single charge. We believe this, along with the expansion of
our supercharging network is the right strategy to combat range anxiety.
Since
the revision of FSD pricing in North America, we've seen production
rates increase meaningfully and expect this to be a driver of vehicle
sales as the feature set improves further. Cost per vehicle declined
sequentially when we removed the impact of Cybertruck. While we are
experiencing material costs trending down, note that there is latency on
the cost side and such reductions would show up in the P&L when the
vehicles built with these materials get delivered. Additionally, as we
get into the second half of the year, it is important to note that we
are still ramping Cybertruck and Model 3 and are also getting impacted
by varying amounts of tariffs on both raw materials and finished goods.
While
our teams are working feverishly to offset these. Unfortunately, it may
have an impact on the cost in the near term. We previously talked about
the potential of the energy business and now feel excited that the
foundation that was made over time is bearing the expected results.
Energy storage deployments more than doubled with contribution not just
from Megapack but also Powerwall, resulting in record revenues and
profit for the energy business.
Energy storage backlog is strong.
As discussed before, deployments will fluctuate from period to period
with some quarters seeing large increases and others seeing a decline.
Recognition of storage gigawatt hours is dependent on a variety of
factors, including logistics timing, as we send units from a single
factory to markets across the world, customer readiness and in case of
EPC projects on construction activities. Moving on to the other parts of
the business, service and other gross profits also improved
sequentially from the improvement in service utilization and growth in
our collision repair business.
The impact of our recent reorg is
reflected in restructuring and other on the income statement. Just to
level set, this was about $642 million of charge, which got recorded in
the period. And I want people to remember that we called it out
separately on the financials. Sequentially, our operating expenses,
excluding surcharges reduced despite an increase in spend for AI-related
activities and higher legal and other costs.
On the capex front,
while we saw a sequential decline in Q2, we still expect the year to be
over $10 billion in capex as we increase our spend to bring a 50k GPU
cluster on line. This new center will immensely increase our
capabilities to scale FSD and other AI initiatives. We reverted to
positive free cash flow of $1.3 billion in Q2. This was despite
restructuring payments being made in the quarter and we ended the
quarter with over $30 billion of cash and investments.
Once again,
we've begun the journey toward the next phase for the company with the
building blocks being placed. It will take some time, but will be a
rewarding experience for everyone involved. Once again, I would like to
thank the entire Tesla team for their efforts.
Travis Axelrod -- Head of Investor Relations
Great.
Thank you very much, Vaibhav. Now let's go to investor questions. The
first question is, what is the status on the Roadster?
Elon Reeve Musk -- Chief Executive Officer and Product Architect
With
respect to Roadster, we've completed most of the engineering. And I
think there's still some upgrades we want to make to it, but we expect
to be in production with Roadster next year. It will be something
special. Like the whole thing might be.
Travis Axelrod -- Head of Investor Relations
Fantastic.
The next question is about timing of Robotaxi event, which we've
already covered. So we'll go to the next question. When do you expect
the first Robotaxi ride?
Elon Reeve Musk -- Chief Executive Officer and Product Architect
I
guess that, that's really just a question of when can we expect the
first -- or when can we do unsupervised full self-driving. It's
difficult, obviously, my predictions on this have been overly optimistic
in the past. So I mean, based on the current trend, it seems as though
we should get miles between interventions to be high enough that -- to
be far enough in excess of humans that you could do unsupervised
possibly by the end of this year. I would be shocked if we cannot do it
next year.
So next year seems highly probable to me based on quite
simply plus the points of the curve of miles between intervention. That
trend exceeds the humans for sure next year, so yes.
Travis Axelrod -- Head of Investor Relations
Thank
you very much. Our third question is, the Cybertruck is an iconic
product that wows everyone who sees it. Do you have plans to expand the
cyber vehicle lineup to a cyber SUV or cyber van?
Elon Reeve Musk -- Chief Executive Officer and Product Architect
I
think we want to limit product announcements to when we have a special
-- a specific product announcement event rather than earnings calls.
Travis Axelrod -- Head of Investor Relations
Great. Our next question is, what is the current status of 4680 battery cell production? And how is the ramp-up progressing?
Lars Moravy -- Vice President, Vehicle Engineering
4680
production ramped strongly in Q2, delivering 51% more sales than Q1,
while reducing COGS significantly. We currently produce more than 1,400
cybertrucks of 4680 cells a week. We'll continue to ramp upward as we
drive cost down further toward the cost parity target we set for the end
of the year. We've built our first validation Cybertruck with dry
cathode process made on mass production equipment, which is a huge
technical milestone, and we're super proud of that.
We're on track
for production launch with the dry cathode in Q4. And this will enable
cell costs to be significantly below available alternatives which was
the original goal of the 4680 program.
Travis Axelrod -- Head of Investor Relations
Great. The next question is any update on Dojo?....
