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On energy storage, Musk said demand for Megapack remains strong and Tesla is “excited to begin production of Megapack 3 later this year” at a new factory outside Houston.

Taneja said Tesla has seen a “resurgence in demand” in EMEA, citing France and Germany as showing “over 150% quarter-over-quarter growth in deliveries.” He also pointed to delivery growth in South Korea and Japan and “slight growth” in U.S. quarter-over-quarter deliveries. Tesla ended the quarter with “the highest Q1 order backlog in over two years,” he said, adding that while gas prices helped, the order improvement began before the recent increase.

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Taneja said automotive margins excluding credits improved sequentially to 19.2% from 17.9%, while noting “one-time benefits from warranty write-downs around $230 million” and “some relief on tariffs.” He added Tesla had not realized any benefit from a recent Supreme Court ruling on IPR tariffs due to uncertainty on the final outcome, and said tariffs and “sustained high interest rates continue to add to our automotive costs.”

On constraints, Taneja said the “biggest limiter continues to be our battery pack capacity.” In response to an analyst question, Tesla VP of Vehicle Engineering Lars Moravy said Berlin recently began launching a Model Y battery pack using Tesla’s in-house 4680 cells and that the program is “ramping up nicely.” Moravy also said Tesla is adding capacity in Reno by retooling battery pack lines and is ramping in-house LFP module production and related packs in China.

Taneja said Tesla’s paid FSD customer base reached “nearly 1.3 million” globally, with most of the recent growth coming from subscriptions. Upfront purchases rose 7%, he said, after Tesla removed the purchase option in some markets during the quarter.

Taneja also said Tesla received FSD approvals in the Netherlands, which he said “sets us up well for an EU-wide approval later in Q2,” subject to the regulatory process. He added Tesla has also received approvals in China, though broader approval has not yet been granted, and Tesla is “hoping that we can get approval by Q3.”

During analyst Q&A, Taneja told New Street Research’s Pierre Ferragu that his framing of adoption momentum was “the right way to think about it,” adding that Tesla is seeing subscriber churn “coming down,” which he attributed to product improvement.

Musk said Tesla has expanded Robotaxi service to Dallas and Houston, using the “same software source in the Bay Area,” and described validation as the primary limiter to rollout. He said Tesla wants to avoid “a single accidental injury” during expansion and said the team has had “not had a single one to date.”

On broader rollout, Musk said Tesla hopes to have unsupervised FSD or Robotaxi operating in “a dozen or so states by the end of this year,” though he said revenue from the offering likely won’t be “super material this year” but could become significant “next year.” Asked when unsupervised FSD could reach customer cars, Musk said he was “just guessing,” but “probably in the fourth quarter,” with gradual geographic rollout based on safety confirmation.

Musk also addressed hardware constraints, saying Hardware 3 vehicles “simply do not have the capability to achieve unsupervised FSD,” citing significantly lower memory bandwidth than Hardware 4. For customers who bought FSD, he said Tesla is offering “a discounted trade-in” for Hardware 4 vehicles and plans to offer upgrades that require replacing the computer and “the cameras.” He said Tesla would need to set up “micro factories or small factories in major metropolitan areas” to complete upgrades efficiently.

A company representative added that Tesla plans to release a “V14 version for Hardware 3,” described as a “distilled version” of V14 software, expected “end of June.”

Regarding safety metrics and NHTSA filings, a Tesla representative said the company is increasing its QA fleet and using both the QA fleet and customer fleet metrics to scale safely, adding that “the NHTSA filing also shows” zero incidents. The representative said the customer fleet is “close to driving 10 billion miles on FSD” in the coming weeks, which Tesla is using to monitor safety and scaling issues such as intersection blocking or incorrect drop-offs.

Musk said many of the constraints on wider Robotaxi deployment are “not safety issues, but convenience issues,” describing scenarios where the vehicle becomes overly cautious and gets stuck. He also said Tesla has worked with NHTSA on issues raised and noted that Tesla “did change the cameras some months ago,” with filings referring to older vehicles. Another representative said software now restricts FSD when cameras cannot see clearly due to residue build-up.

On robotics, Musk said Tesla is preparing Fremont for the start of Optimus production later this year and is constructing a second Optimus factory at Giga Texas, which he said could start production “around summer next year.” Responding to investor questions, Musk said the Optimus 3 reveal may be pushed closer to production, and he estimated production start “around the late July, August timeframe.” He cautioned that output ramp rates are “impossible to predict” for a new product and supply chain, and said initial production will be slow as Tesla works through “10,000+ unique items” required for volume production.

On vehicles, Musk said Tesla has “just started production of Cybercab” and will begin Tesla Semi production soon, while warning that new-product ramps typically follow a slow initial “S curve” before accelerating. Musk also said Tesla expects to ramp production of all vehicles across factories “to the best of our ability” through the rest of the year.

Musk praised Tesla’s AI chip team for taping out AI5 and said Tesla has begun discussing “Dojo 3.” He said AI5 is expected to go into Optimus and Tesla’s data center, and that unsupervised self-driving may be achievable on AI4 at safety levels “far greater than human,” making AI5 “not immediately needed in the car.” He also discussed plans for an AI4 upgrade with higher RAM, which he said could go into production “middle of next year.”

On semiconductor manufacturing, Musk said Tesla has finalized plans for a research chip fab at Giga Texas and will start construction this year. In response to Truist’s Will Stein, Musk said Tesla’s research fab is expected to be a “$3 billion-ish initiative,” capable of “a few thousand wafers per month,” aimed at trying new manufacturing ideas and validating production processes. He said SpaceX would handle the “initial phase” of a larger-scale “Terafab,” with additional details still being worked out and subject to governance review. Musk also said Intel is “excited to partner” and that Tesla plans to use Intel’s 14A process.

Closing the Q&A, Tesla addressed solar, with a company representative saying the U.S. residential solar market is “going through a bit of a correction” after the loss of a homeowner tax credit last year. The representative said Tesla introduced a lease product to capture the tax credit and offer competitive pricing, and said Tesla has debuted its own solar panel and mounting system as part of an integrated home energy ecosystem.

Tesla, Inc (NASDAQ: TSLA) is an American company that designs, manufactures and sells electric vehicles, energy generation and energy storage products. Founded in 2003 by Martin Eberhard and Marc Tarpenning, Tesla grew into a vertically integrated mobility and clean‑energy company with Elon Musk serving as its chief executive officer. The company’s stated mission is to accelerate the world’s transition to sustainable energy, reflected in its combined focus on electric drivetrains, battery technology, renewable energy products and software.

Tesla’s automotive business includes a lineup of battery‑electric vehicles and related services.

The article “Tesla Q1 Earnings Call Highlights” was originally published by MarketBeat.