Tesla’s 2016 Shareholders Meeting yesterday was an unusual one. CEO Elon Musk and CTO JB Straubel were on stage for close to 4 hours and went through the bulk of Tesla’s history – recounting stories from the early days with longtime employees of the automaker.

We already reported on important nuggets of information the execs released about the Gigafactory and the Model 3 during the event, but what probably stands out the most from the event – from my perspective at least – is Musk’s rant about the importance of the “machine that makes the machine.”

The CEO said that he recently – in the last 2 or 3 months – came to the realization that the potential for improvement is at least a factor of 10 greater in manufacturing vehicles than in the actual vehicle engineering.

He shared his excitement for a new focus on the machines building the machines:

“We realized that the true problem, the true difficulty, and where the greatest potential is – is building the machine that makes the machine. In other words, it’s building the factory. I’m really thinking of the factory like a product.”

It’s not the first time Musk referred to a factory as a product. Last year, when Tesla announced that the Gigafactory in Nevada will be renamed ‘Gigafactory 1’, he said that they plan to package the battery plant into a product to be able to reproduce it.

But now Musk is not talking about battery manufacturing, but car manufacturing. The CEO said that he only recently realized the potential for improvement after spending the last several months in operations on the Fremont factory production floor.

He added that he doesn’t really have a desk or an office anymore and that he spends most of his time in manufacturing operations where he does his “favorite thing”: apply physics first principle. He turns manufacturing into an equation:

“When you think of a manufacturing facility, for a given size of factory, the output is going to be volume times density times velocity. If you look at our factory and say what is the density of useful to non-useful volume. It’s crazy low. It’s like 2 or 3 percent if you look volumetrically – not on a footprint basis. Then you look at velocity. What is a reasonable expectation for the exit velocity for the vehicle coming out of the factory. You might think that some of the most advanced car factories in the world are very good at making cars and they are maybe making a car every 25 seconds – that sounds fast, but actually, if you say the length of the car plus some buffer space is approximately 5 meters so it’s taking 25 seconds to move 5 meters. That’s 0.2 meter per second or not much faster than a tortoise.”

Musk then said that he would expect cars to come out of a factory at at-least walking speed. He also sees a potential for an order of magnitude improvement in density from 2 or 3 percent to 20 to 30 percent.

He compared both the manufacturing process and the potential for improvement to a system on a chip (SoC). It sounds like Musk has been hanging out with a lot of SoC architects since Tesla hired a whole team out of chip maker AMD.

The CEO concluded his speech on the subject by saying that he sees at least an order of magnitude of overall improvement in manufacturing efficiency and that he is very aware that most people will not believe him.

Here’s the video starting from where Elon starts to talk about “the machine that makes the machine”:

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