Tesla, Inc. (TSLA) Earnings Call Transcript & Summary

Hello, everyone. Welcome to this session about road freight decarbonization. My name is [Eric Burke]. I'm leading the road decarbonization work that climate work is doing in our corporate networks, EV100 and EV100 plus as well as the subnational network we have with Under2 Coalition. Also warm welcome to the people online. A reminder on that, we are streaming all our events at Climate Week this year, and you can go into climateweeknyc.org to register if you are not able to be here tomorrow and so on. Also, if you want to share pictures on social media or comments and so on, please do that on Instagram or threads and use the hashtag Climate Week NYC. This session will have 2 parts. First, we will have our keynote speaker with President Reynolds from the California Public Utilities Commission. She will describe the journey that has made California a worldwide leader within this field. After that, we will have a panel led by the Global Senior Director for Drive to Zero, Stephanie Kodish and representatives from the corporate and public society, talk about the barriers and opportunities for how to electrify the road freight sector. So with that, a warm welcome to President Reynolds for the keynote speak.

Thank you, and good afternoon, everyone. I'm here to get you warmed up after lunch for the afternoon talking about heavy-duty freight. And heavy-duty freight is actually something that we spend a lot of time thinking about in California, very important subject. And so why is that? In California, we have science-based climate targets. We have a goal of climate neutrality by 2045. And this actually isn't just a target. It's an enforceable goal. And so we have many regulations that will take us to -- on the path toward that goal. In California, 50% of our greenhouse gas emissions come from the transportation sector. And that includes both tailpipe emissions and the upstream emissions caused by transportation. So we know that a big part of that is from the heavy-duty sector. And the thing that's important about the heavy-duty sector is, this is where we see the public health impacts the most acutely. This is where diesel is combusted and ends up in our communities on our roads, on our freeways. And it's especially true when you think about freight, 40% of the goods that come into the United States pass through San Pedro Bay in California and go through the ports of LA and Long Beach. And then from there, you think about those goods being shipped across the freeways to the warehouses and logistics centers throughout California. And so any kind of reduction in emissions that we can get from the heavy-duty sector in California has a tremendous impact. It helps with both our global warming targets as well as our public health crisis that we're seeing, especially in Southern California. And what we're trying to do is build something that can then be exported. All of our climate policies are built with the idea that we want to see them scaled. We want to see other jurisdictions adopt them. We want to see markets built we want to see policies exported. And so I'm really glad to be here talking to you -- all of you today for just that reason. So I'll share a little bit about, first of all, starting with our successes. And I also want to say that we come here -- California with a lot of humility. We know that we make mistakes. We have big problems in California. We don't do everything right, but we're really very, very focused on our policies. We're very, very focused on seeing real action on the ground. And we've seen some of that. So heavy-duty builds on the success in the light-duty sector? And in California, we had 40% of all the light-duty zero-emission vehicle sales have happened in California, from the U.S. -- the U.S. total. We went from -- in the past 3 years, starting in 2020, we had about 8% of our sale -- light-duty vehicle sales ZEVs. Now we're up to 25%. So 1/4 of the light-duty vehicles that are sold in California are zero emission vehicles. We've seen some work on school buses. We focused a lot on school buses given that diesel and children is not a good combination. So we've really tried to deploy school buses to California schools, and we now have the biggest fleet in the United States, at least. We have seen -- all of our ports are required to have clean port plans. So we've made some progress on that. And I had the pleasure of being stuck in traffic recently in the Bay Area and saw one of our Frito-Lay trucks go by, that's a partnership between Frito-Lay and Tesla for an all-electric semi truck. So that is some exciting things that we're seeing in California. So what do we see for the future? We're doing -- when we think about medium and heavy-duty in particular, we think about really 3 things: regulation, incentives and alliances. With a focus on regulation and incentives. And so recently, we have adopted in addition to our light-duty requirements, we've adopted requirements of regulations that apply to the heavy-duty sector. Some of you may be aware of the executive order that Governor Newsom issued recently. Most of you probably heard of it in terms of the 2035 goal to eliminate the -- eliminate fossil-fueled vehicles, so light-duty vehicles. By 2035, all sales of cars, light-duty cars and trucks in California will be electric. But you may not know that it also included a heavy-duty element. So in that executive order, the governor set a target of 2045 for fleets of medium and heavy-duty vehicles to be electric as well as a subtarget of 2035 for drayage trucks. So in the heavy-duty freight sector, we know that drayage trucks also have a big impact. These are the trucks that drive through communities, shuttling goods between our ports and their ultimate destination. So we have an executive order that sets the path and then we've started to build regulations on top of that. So that we're encouraging manufacturers to build the vehicles that we depend on. And we have requirements to fleet -- for fleets to start getting greener and greener. We also have incentives in California. We have started in addition to our light-duty incentives that have been around for a while. So when you buy an electric vehicle in California, for some years now, you've been able to get an incentive. We've been moving those incentives to lower-income customers so that as we build the market, we're starting to subsidize the folks who need it the most. So light duty incentives have been around for a while. We're moving to heavy-duty incentives as well as incentives for charging infrastructure. And we're trying to make the most of the IIJA funding that's come in using that as well to supplement the state funding that we have available. And then I mentioned alliances. So in addition to being here today, we are active participants in the International ZEV Alliance and because we know that we can't do this by ourselves. And then I also want to talk a little bit about the grid, the electric grid. So the work that we've done so far, we've been able to essentially, for the most part, use the electric grid that we have in place. But when you think about the heavy-duty sector, you're taking existing freight corridors and then having to put those on top of the existing electrical infrastructure. So the electrical infrastructure has to support the change in the fuel, the electric trucks that are going to be traveling down our freeways. And they have to -- it has to be ready to provide the charging that we need. Similarly, with the ports, we're electrifying ports. The ports are going to need to charge all of their equipment. Charging, we've seen the patterns. It doesn't necessarily follow the air conditioning pattern in terms of load. We need to be ready for charging at night. And so this is all a part of the planning that we've been taking into account. We're trying to get ahead of what we know is coming. So in terms of supply, we're thinking about what -- how do our renewables pair with the charging that we need to do? How do we have enough energy. Although vehicles and especially heavy duty, it provides a flexible load, which is really important when we're starting to have more and more solar on our system, but you still need to have enough energy to do the charging. So we're projecting out into the future when we know that supply -- that load is coming, and we'll have the supply to get there. That means projects, it means transmission. All of that is being taken into account and we're getting all of our retail sellers ready to make the investments that they need to match that load. And then similarly, with the grid infrastructure itself, we're already seeing a need for capacity upgrades in the light-duty side. And we know that when heavy-duty charging comes, there's going to be a need for capacity on the distribution system. So that's going into -- we're taking that into account for our planning. We're starting to think ahead of where that charging might occur so that their grid is ready. All of these things are still in progress, and we look forward to learning a lot from events like this event Climate Week as well as all of the jurisdictions, what's happening in other states, other nations as we go together to build a cleaner grid, to build a cleaner fleet of vehicles and to build cleaner ports. We know that this is -- it's essential to do this work. It has to be done. It's hard. I remember 5 years ago, we didn't think there was going to be a heavy-duty long-haul truck. And now it's very much a reality that we're seeing. So it's worth it. It's worth tackling. And I'm really happy that this panel is going to be focused on this topic, and I'm happy that you're here today to listen. So thank you very much.

President Reynolds, we really value the leadership role of California and appreciate your reflections and experiences. I'm Stephanie Kodish. I'm the Global Senior Director for CALSTART Drive to Zero program. CALSTART is a 30-year-old nonprofit. We are based out of California and we are working across stakeholder groups to accelerate the transition. We work across policy, across markets and across technological areas in order to identify the solutions needed in order to accelerate the transformation. Drive to Zero is a collaborative effort to lead the global transition of commercial vehicles. We do this in partnership in part with so many stakeholders and especially with the Netherlands where we lead the global memorandum of understanding to achieve 100% zero emission, medium- and heavy-duty vehicles by 2040 and I am delighted to be moderating today's panel and have the pleasure of introducing our panelists. Andrea Marpillero-Colomina, Sustainable Communities Program Director with Green Latinos; Concepción Boo Areas, Director and Global Partnerships in ESG with Maersk. Rohan Patel, Vice President of Public Policy and Business Development with Tesla and Neil Russell, Chief Administration Officer with Sysco. But before turning to them and inviting them to join me on the stage, I do want to offer a few framing remarks. While medium- and heavy-duty vehicles represent just a small share of the global fleet, just 4%, they contribute disproportionately to fuel consumption at 35% and disproportionately to emissions as well with over 70% of nitrogen oxide emissions of on-road vehicles. Governments and industries, including California, of course, are stepping up ambition and action in order to address the significant source of health harming and climate devastating pollution. There are proposed rules now in the United States and in the EU that will make meaningful strides towards curbing these emissions. And right here in New York, there is the largest number of zero emitting trucks in the United States outside of California. Freight is increasing the demand for ZETs and manufacturers are responding by shifting their products towards zero emitting solutions. The number of OEMs with zero-emission truck offerings has been steadily increasing, and that's both in terms of regional focus as well as in model availability. There are over 400 ZET models worldwide that fulfill a wide range of applications. And this doesn't include buses. And it's important to make mention of electric buses because it is the very technologies that enable transfer and bus growth across the globe is explosive. So across regions, I want to offer just a couple of pieces. One is that the United States and Canada have experienced steady growth. Europe shows moderate growth and models available across OEMs as well as ZETs that are offered. But when you look across overall model availability, it is China that's representing the vast majority of ZETs globally at 95%. And when we look out across the time horizon, we see that global freight demand will more than double by 2050. The largest growth rates will happen in Asia and in Africa. By 2050, China and India will have a larger freight volume than the rest of the world combined. In terms of cost, the myth that zero-emission vehicles do not compete is just about as good as dead. The majority of ZET applications will achieve TCO parity by 2030. Prices are declining through a variety of factors, economies of scale, improved regulations and mechanisms like electricity tariffs. In countries that have supportive policies and incentives, the timing to reach cost parity shifts forward significantly because clear requirements and strong market signals and certainty for industry. And this, in turn, supports overcoming 3 main barriers. One of them is the necessary long-term infrastructure planning. Another is expectation setting for supply and demand and another is aligning the finance in order to support the transition. What is needed now is ground-breakingly deep collaboration across energy, infrastructure and transportation sectors as well as stakeholders. There is clear government and industry-wide recognition that ZETs are here and are the future. The only real question is how quickly will we go and how wisely will our path be? And with that, I would be delighted to welcome our panelists to the stage. Great. So if you would each please introduce yourself. Kindly let us know your name and your organization. And if you would give a couple of examples about why your organization is focusing so much on transformation and a little bit about what you have done so far. Why don't we turn first to Andrea.

Sure. Hi, everybody. I'm on Andrea Marpillero-Colomina and I am Sustainable Communities Program Director in GreenLatinos. GreenLatinos is a nationwide nonprofit that focuses on the conservation and environmental priorities for Latino communities. We are focused in the -- I forgot the question already, to be honest. We're focused on the space of transportation because of the disproportionate impact of transportation emissions on Latino communities and on other disproportionately burdened communities in the United States and the legacy of environmentally damaging policy intentional or not, and our role and our belief that we have a role to play in reversing that and in making change for all.

Thank you, Andrea. Please, Neil.

Well, hey, everyone. Neil Russell, Chief Administrative Officer for Sysco. So in 2021, we set a science-based target initiative, climate change goal to reduce our own greenhouse gas emissions by 27.5% by 2030. And we feel very passionate about that, and we're very purposeful in the decision of that date. It was 2030. It was not 2040, was not 2050, which means it will be us. It will be this management team, it will be me who will decide how we're going to do this. It's not a hoping wish and a future generations problem to solve, it's going to be us who are going to work together to do that. There are 2 primary components to how we can achieve that, pursuant to the discussion we're having today. We have a large fleet and a lot of trucks on the road. And when I talk about trucks, I don't want you to have an image of a UPS like van in your head or what we would call a straight truck, which would be a truck, but it's all one unit, all combined. And this is, I want you to think, of an 18-wheeler. That's the kind of truck that we're talking about. So it has the 2 components, the tractor, a Class 8 tractor and a trailer, which is also, by the way, refrigerated and run typically by diesel refrigeration unit. In order to get there, we have to electrify 35% of our fleet by 2030. And at the time we made the goal in 2021, that's a vehicle that basically did not yet exist. So that was how far leaning we were in doing that. And then the second part is, in order to do that, of course, that requires a charging infrastructure. We also committed to 100% renewable energy by the same date to ensure we were charging appropriately, which is going to require a lot of effort along the way.

Thank you, Neil. Please, Concepción.

It's time that you make the preference to time, right, because time is of essence in everything that we do nowadays, right? But I used to think we at Maersk the global logistics provider of container services and logistics. We want to become carbon neutral by 2040. That means that is really, really not many years. Less years, the number of years that I have been married with my husband, I wonder whether for him is a really long time. But in any case, we don't have that much time, right? So we all have that pressure on top of us. Anyway. My name is Concepción Boo Arias, I am Director of Global Partnerships and ESG at A.P. Moller - Maersk, the shipping company that has recently become an end-to-end provider of logistics. Funny to be in New York on a rainy day, just 4 days after a sunny day in Copenhagen, we actually organized the name giving event of our first [indiscernible] of our first container vessel able to run on green methanol. And you will ask why I mentioned this, if we are going to talk about heavy-duty trucks. I talk about this because I have more than 20 years' experience in public affairs, communication and ESG. And most important, I have been with A.P. Moller from the very beginning, from December 2018, just around the corner, 4.5 years ago, right? When we first launched our first pledge, our and the industry first pledge ever, right? And back then, we decided that we wanted to become carbon neutral by 2050, now is by 2040. But back then, it was to be completely honest with you, as shot to the moon because we didn't know how to get there. What we did was -- we showed commitment. We show the will and we ask for how we did a call for action, asking regulators, competitors, customers, everyone across the value chain to actually pitch in and try to help us to get there. From 30 different technologies that were eligible by them, we narrowed to 3, now we know that in this decade, if we really want to start taking action, we bet on green methanol, but we believe that there will be other technologies and all that about shipping, just to say that back then, we decided to focus on the maritime industry because it were -- more than 90% of our GHG emissions comes from right. But now what we see is that we have a long way to go, but the funny thing is that 10% of the landside operations, so warehouse, call distributor centers, terminals at ports, the trucking services, rail, airplanes. All that is going to be even more difficult for us if we really want to get our target. And the reason is because we are not a seasonable player there. We don't have the muscle that we have in shipping. So we relied on many other players, many other actors and their collaboration is key. And sorry, because maybe it took a little bit too long. Sorry.

Sorry. I think that's wonderfully helpful and it's interesting the theme that you all are building on about collaboration and help across your networks, Please, Rohan.

Well, I think when you have kids, everything is related back to your kids. I've got a couple of daughters, my younger one is obsessed with Tesla. She loves getting on the video games on the console, she loves arguing with the boys at her school about what's the fastest car and she's really into it. My older one, not at all, doesn't care about what I do at all. But I was watching an event we did to handover the trucks and huge thanks to the State of California for all they did to make that happen. But we handed these trucks over to Pepsi. And I thought it would be all Pepsi wraps that we did, the normal Pepsi logo. But instead, we also had this hot orange wrap with Cheetos and my daughter is obsessed with Cheetos. So now she's excited about the truck and wants to go to California to check it out. I think this is one of the most important things that we can do as a company, and I'm super excited to be able to work on this. What Climate Group did with that opening speaker, Alice, the President of PUC should be repeated everywhere. When I tell people that the most -- one of the most important things that we can do is reinvigorate our POCs I mean this wholeheartedly because -- and what President Reynolds is doing and what she talked about is fundamental to everything that we're doing here. This isn't just true in the U.S., it's true everywhere. The constraint and the most important problem that we face in this sector is and will be the capacity that we need and the interconnection time lines that we have that we have to deal with, with utilities. And so PUC staffers, PUC leadership, government leadership here is going to be critical in terms of moving this forward.

Thank you, Rohan. [Operator Instructions] So why don't we go in reverse order, maybe Rohan you'd like to begin.

I think maybe this is for you. We know some of the statistics and the reasons why there's a focus on drayage. But at Tesla, we're focused on long haul. I think there's a big advantage there. I don't know maybe from the disadvantaged communities perspective and from the equity perspective, be interesting to hear how you guys are prioritizing or where maybe you're putting your advocacy efforts and how companies like us and others can help make that happen.

Sure. That's a great question. And I think we're really focused on looking at and understanding the impacts on communities, right? And we know some of the biggest nonprofit and environmentally focused organizations in the country come out with report cards every year or every other year, talking about the environmental impacts -- various environmental impacts in communities. So for example, a couple of months ago, the American Lung Association came out with their annual report card, right? And they talked about the fact that about 1/3 of people living in the United States are adversely affected by ozone or particulate manner pollution in their communities, right? That's a lot of people, right. We also know that millions of people in the United States live within 500 feet of a major roadway, right, including me. And I also have a daughter who's 8.5 months old. So I think about that a lot especially now that we have our windows open, thankfully after stifling summer here in New York. And the impact that trucks, right, coming through communities every single day has not only on these sort of more obvious emission issues of particulate matter emissions, penetrating lungs, causing everything from asthma to heart disease to lung disease. But other impacts, right? If you -- if your best friend has asthma and you have to stop playing every now and then because they've got to take a pump of their inhaler, right? If the sound from the trucks is making it hard for you to concentrate while you're doing your homework right, or sleep at night, right? That's an everyday harm to you in your community. And so I think what corporations can do is spend a little bit of time familiarizing themselves with sort of what the human side of those statistics mean and work with communities to say, to ask directly, which is, I understand a really scary moment for corporations that many corporate actors may feel like they have antagonistic relationships with communities, that they're not welcome there, right, but ask, what is the thing we can do? What is the 1 -- where can we start in making the fact that truck traffic in your community is a reality. What can -- what is the #1 place we can start to mitigate that harm, right? Is it electric trucks everywhere is that electric truck on specific routes that we -- let's just use the port of LA and Long Beach as an example, where we know that there are dense residential communities particularly close to high-traffic freeways. Is it something else? Is it education and engagement with communities so that they understand what the benefits of electric trucks could be. I think I'll stop there because I could probably just keep going.

Thank you, Andrea. And I just want to lift up. I think that the work that Green Latinos does on direct engagement with communities is so important. But the other thing that you mentioned that I also think is so vital to this conversation, is prioritization. Your turn to ask a question, you are the panelist.

Okay. We're not going to request order, but that will in I'll select myself. I guess I'll ask you a question, Rohan. I'm interested to hear a bit about Tesla's engagement with communities and the work that Tesla is doing to directly engage and think about sort of how can Tesla play a role as a community outlay, particularly given that as a corporation, they're really out in front and they're sort of these days sort of the face of electric vehicles. Everybody knows that a Tesla is an electric vehicle and may not even know that other companies are making a lot of vehicles. So sort of what's the role there as a company playing that role?

It's a really good question. Actually, on my team, we have a set of social impact leaders. And what we've done is we've decided to focus specifically where we have a big employee presence to bring volunteerism from our employees in Fremont, in Buffalo, in Austin, in Reno, Nevada, in Toronto to bring that volunteerism into the communities. And so we've been partnering. Each of our locations has their own -- has come up with their own things that they want to support in the community. So in part, what we've shied away from is sort of advertising this is some great thing that we're doing because it's actually quite -- it's quite important for us in terms of retention. Our employees want to be giving back in the community, want to be doing these things, especially if they already do it anyway. So like, for example, we also have a solar side. We do residential batteries or do commercials, and so we're actually partnering with entities to do that in those communities in which we have employees. And so it's kind of become a very self-interested effort for us to keep and retain the best talent.

Well, looks like we're going in pairs. Neil, would you like to?

Very good. So maritime is interesting. I think a lot of people associate trucks when they talk about freight, but maritime. It's an interesting part of it. And we had an interesting stat read to us about the ports and product going through the port. So my question is really about partnerships. And as you think about the importance of ports and the partnerships with different states, different federal governments, how much better can we be? How important is it for partnerships across government and industry to strengthen in order to make more progress here.

It's actually crucial, right? Because no one can -- I mean we really need to share the burden on the value chain is the only way forward, right? And for -- we also -- we are a port operator, right? So we are just currently now working on a white paper to look into what it is that it needs to be done right now and right here. And it's crucial that we together as cargo owners, provider of different type of services, we ask the same things to the different regulators, the different governments at a state level, at local level, at regional level and at global level. And it is very important that we go hand in hand, meaning we all look from different approaches, and we -- there might be some nuances, right? But it's very important that we ask, for example, and has been already mentioned here about adding capacity because it's a transfer industry that needs but are all the industries across the economies, right? It's all [indiscernible] sectors, they are going to be asking for the same, more green electricity. So it's not about the transfer of sector, right? So we really need to let them understand that this is the priority here now. It's not possible. I just learned from one of our stakeholders in Copenhagen, in Denmark, a really small country, 5 million population, from leader on climate, right? And it takes 26 individual permits to get the possibility for the green methanol to get to the final destination in a country where things actually work out. I am from Spain and 26 is a [indiscernible] number, probably it's going to be multiplied by x, right. And I think it is the same in here. So collaboration, partnership is key among private companies, but private and public collaboration for sure? So now I think, now is my turn, right. For me, and also talking and thinking about our Maersk Laura vessel last week, right, for me, it's not about us getting to actually achieve the green transition. It's about getting there on time, right? And if I look at your industry, what I see is that a lot of remarkable step, but it is still not enough. And sorry that I mentioned what no one wants to mention is money. But when I talk to our customers, right, they all want to get there, but cost is one of the things that is actually a challenge. So I would like to hear your perspective about that because one of the problems that we see in the U.S. but also in Europe, right, is that particularly when we talk about trucks, and heavy-duty trucks. One of the things that we see is there is a lack of local providers, which, I guess, in a way, could be seen short term, like a benefit for the industry. But long term is not right, and it's actually triggering a lot of bottlenecks that we really need to avoid.

Yes. It's a great question. I think there's a couple of layers to it. One, there's availability of vehicles like this, which is an extreme challenge trying to get the OEMs to produce and produce at mass. So companies like us can facilitate the change. And then when you have it, the optimization of. So the electric vehicle is a unique vehicle that requires a certain amount of routing optimization that is different than what you otherwise might have. We're fortunate with our type of network, which is why we're pushing so hard for it. Our typical route is 100 miles or less. So we're good to be able to do that. If we can do the infrastructure appropriately. Others not so much, if you're 2 or 3 days over the road, that's a lot more complex situation let alone than crossing state lines with a variety of regulations that exist. So to be on time within a routing optimization and an efficiency within different types of fleets that require different charging times or whatever it may be, is extraordinarily complex and it requires investment. The thing that I think we all should do more of, though, is think about the time line of that investment. There is an inflection point in which that investment pays off. But in order to get there, you need patience and you need to have a time horizon that is sufficient to see that pay off. You eventually will have less diesel costs, less maintenance costs, et cetera, better turnover with your employees, that all leads to better on-time, better efficiency if you can work through that cycle, but it requires that balance sheet strength, that integrity and that ability to stay with it on your goals in order to get there.

So I'd like us to build a little bit on what each of you have shared and Neil, if I may, keep you on the hot seat, would love to drill down a little bit more. So I hear you talking in terms of investment trajectory and patients, can you speak into why logistic companies and transport buyers are moving toward electrification, especially given that time horizon?

Yes, for sure. I think there's several reasons together. Some companies might wait towards one or more than others. But I'll list a few financial would be one -- what I'm talking about here is this inflection point where it's going to be financially advantageous for you. The vehicle currently could be 3x what a diesel vehicle could be, and that's a lot to swallow. But if you work through the time period over time, you can bring that down and get to that inflection point and get there financially. So there's a financial benefit in the long term if you have the right model to think about in doing that, first and foremost. There's the regulatory environment, which we talked about here, tremendous inconsistencies across states in that. Some requiring it, some not, some somewhere in between. Some trying to figure it out. If you're a nationwide operator, that's a complex environment to think through and where you place your assets and where you place your feet. But nonetheless, regulatory is a factor to think through, depending on where you operate. I would add the driver to the mix. So think about what it's like to drive a traditional diesel vehicle versus what it's like to drive an electric vehicle. And it's literally a trade-off between you could get jiggled around all day or you could be the coolest kid on the block with the smoothest ride. It is an extraordinary ride. And for a driver, there's a fatigue element to your day that, that helps with, and that helps the retention, it helps your cost in the long run back to my inflection point over time. And then, of course, the environmental impact would be the fourth that I would mention. So we have a goal, other companies probably have goals as well. If you're going to achieve your goal, as we talked about here in the opening, this is a tremendous contributor to the challenge that we're trying to solve. So if you can have a freight movement that's more electric, you're going to make meaningful progress on your environmental goals. And then lastly, I would add customer to the mix. So if you think about a company like Sysco, we're Scope 3 for our customers. So we have customers who are demanding and asking for their suppliers, their distributors, their partners in the supply chain to be responsible in how they deliver. And so if you are doing that, then you're going to be serving your customer better than those who are not. And eventually, again, back to that inflection point, you will win in the long term because you're better positioned for that.

Thank you, Neil. So Andrea, I'd love to turn to you and dig in a little bit on issues around equity. And I think it's really interesting, Neil's remarks about driver interest and also thinking in terms of long-term trajectory on the environmental side of things. Can you speak a little bit based on your own experience about the ways that equity is integrated, as an issue as a consideration in the ecosystem transition to zero-emitting trucks?

Sure. And Neil and I am really glad that you brought that up because I do think that the experience of drivers is incredibly important. Also consider one thing that you didn't totally mention is the fact that sometimes drivers are breathing in the emissions from their gas-powered vehicles and so they're put on additional risk for some of the health detriments that come from that. When it comes to equity, equity is a big word that gets thrown around a lot these days. And I think it's really important to think about equity not being in the transportation space, not being sort of everybody is not confusing it with the quality, right? I am not saying like -- or using it as a way to say every baseline should be the same and everybody should be sort of achieving at the same level. So this company should -- with Teslas pumping out X number of zero-emission trucks every year, and that means all the companies should be buying them, using them, right? We have to think about sort of what equity means in terms of sort of pieces of the transportation infrastructure landscape that maybe none of the people appear -- I can assure you none of the people appear in control. right? The fact that we have a long legacy in this country of the location of highways being disproportionately in black, Hispanic and low-income neighborhoods. The fact that port infrastructure also is disproportionately located in communities of color and lower-income communities. And the fact that governments themselves have done very little to regulate and to protect those people. So actually, I think that this is where the private sector can come in and play a really, really powerful role and saying, "Hey, we're at a new frontier here" and in addition to the fact that we want to have ZEV vehicles on the road, in addition to the fact that we want to strive towards having the zero emission ports. We also want to find new ways to create policy or have policy be created that's really going to allow communities to thrive, right? And that's what equity is. Equity is not like let's all try to do the least amount of harm and hope for the best, right? It's like let's all work together so that we can create an environmental future. Let's start with [ZEV] transportation. So that's where we're here for today. But like let's create a transportation feature that is not only accessible to everybody, but is really improving every single person's life and the policy that's made to improve those lives, right? So those community members, the truck drivers, the corporate bottom lines, everybody, not that I really care much about corporate bottom lines, but some people do.

So we have all of the stars aligning about all of the reasons why this is the move. We've got corporate bottom line and equity for communities, thriving communities, long-term investment certainties around how and why things should match up. But what are the challenges, so Concepción, I'm going to turn to you. Can you speak into what you see as the key challenges with a focus on infrastructure for electric trucks. And I'm going to ask you a subpart of that question, which is the role of regulation. How do you see regulations as intersecting to address those challenges?

Again, regulation is key to pass from electric in theory to electric in motion, right? And we are currently hiring a lot of work with our customers cargo owners, moving cargo from me to B, right, in order to make sure that we can in this country, in the U.S., right, build up [landside] corridors, right? And what we see is that there is a variety of regulation from state to state, so we need somehow alignment, and we need other states to replicate what California is doing, for example, right, to make sure that we speed up and that we get the fast track to get the green transition done, right? It's really important to have full alignment in this particular case from a logistic provider with utility companies in every single state, but also with cargo owners because we really need to make sure that we place the EV [charging] facilities where they are more relevant for them, right? Based on the needs that they have. And that's for me, one of the most important challenges. But of course, I come again to the cost side of things and it's really important to get subsidies and grants in order to make sure that the right infrastructure is in place and is well planned. So that we really need to make sure the terminals are talking with drivers and utility companies and cargo owners. So it makes sense. We map out the needs, and we do something that is actually relevant and kind of speed up the process that we are involved in.

Thank you Concepción. So Rohan, I'm going to return to a point that you made earlier about the importance of reinvigorating PUCs. And I want to dig in on a particular question around how you would go about articulating what the climate and operational benefits are when you look to zero-emission vehicles as compared to fossil fuels or biofuels?

Well, I mean, for this room, you don't need a lecture on the climate benefits of heavy-duty vehicles. This is 1% of our heavy-duty sector Class 8 as a matter of all vehicles, 18% of the emissions coming from the same sector. So this is a huge area of potential good that we can do. But the PUC thing -- the PUC note that I made, it's actually being -- it's -- I'm kind of animated about it right this second, in particular, because we had a meeting with a California utility. I won't name the utility, but a California utility, about a current set of heavy duty -- or sorry, of DC fast charging that we're trying to get done and the interconnection time line that was given to us, general time line given to us big site, 5 years, this is a regular old DC fast charging site. This is not heavy duty even. This is not the big stuff. That's a huge problem. What we're doing at Tesla to tackle this in part is to try to derisk for the utilities, the interconnection study itself. So to provide software to those utilities that are willing to share that information with us, capacity planning information, so that they can feel more comfortable in terms of the risk position of allowing for those interconnections to happen. So we're developing that software. We would like to work with every utility on deploying it for the most environmental benefit. But this is not just a California issue, by the way, this is a problem everywhere across the globe. It just so happens that because we're asking for such large sites in California, because of the uptake of electric vehicles, because of the success in California of that -- of some of their programs, we're running into these really significant problems. And I think one piece of this that's difficult, especially in the context of the bipartisan infrastructure plan and IRA is this kind of discussion about heavy-duty vehicles is just so important in that context. We should be really focused on using public dollars in the place where there is most impact and where there is the most problem in terms of the commercial entities, corporate entities doing things on their own. In the DC fast charging space for light-duty vehicles, frankly, a lot more could be done there, too. But there's already a good commercial play globally to invest in. There is not on the heavy-duty side. So we need some spurring of that effort. We need more focus on the heavy-duty freight side than we have today with our current policy structure.

Thank you. So we have only a couple of seconds left. So I want to express so much gratitude to you each and to the organizations that you represent for all that you are doing to spearhead the transition to engage deeply with communities and across the value chain. It is just so vital. And I want to lift up and just maybe reflect on a couple of main themes, one being the critical role and importance of regulation and policy and another being the importance of collaboration and deep partnership across this effort. So thank you all for being here. Thank you all for taking part, and thank you to Climate Group for pulling us all together.

A big thank you to the panel. Give them applaud again. We are going to slightly change topic. It's connected to what we have been speaking about here. The next topic is around integrated energy system, how the connection between the building streets and grids can work to decrease the peak use and so on. So I will hand over to my colleague, [Toby], and the new panel. So please, thank you.