'Recession-resilient' Tesla misses Q3 expectations, slows Mexico expansion
- Reference: 1697736606
- News link: https://www.theregister.co.uk/2023/10/19/tesla_q3/
- Source link:
Analysts [1]expected Tesla to report earnings per share of around $0.73 and revenue at $24.1 billion, but the company failed on both counts, [2]earning just $0.66 per share and making $23.35 billion in revenue.
On the [3]earnings call , which began abruptly in the middle of Tesla owner Elon Musk's opening remarks, the billionaire blamed high interest rates and global economic uncertainty for the electric car maker's less-than-stellar quarter – the first since Q2 2019 that Tesla missed both earnings per share and revenue expectations.
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"I'm worried about the high interest rate environment that we're in," Musk said. "I just can't emphasize this enough that the vast majority of people buying a car is about the monthly payment. And as interest rates rise, the proportion of that monthly payment that is interest increases naturally."
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Musk's tone was decidedly different from his [7]claims late last year that Tesla was "recession-resilient," and that pessimism likely didn't help stock prices. Tesla share fell nearly seven percent in after-hours and pre-market trading, and continued to fall once US markets opened.
That economic uncertainty means Tesla is slowing its work on a planned Mexico factory too.
[8]
"In Mexico we're laying the groundwork to begin construction and doing all the long lead items. But I think we want to just get a sense for what the global economy is like before we go full tilt on the Mexico factory," Musk said.
As we noted when the planned Mexico factory was [9]discussed at Tesla investor day this year, the company said it saw the facility as a way to reduce its manufacturing costs, meaning construction delays could have an effect on future earnings.
Tesla has [10]cut prices across the globe on multiple occasions this year while facing [11]increased competition from major, well-established automakers as they roll out their own electric vehicles. Tesla is facing competition in the self-driving lane too, and is reportedly [12]slipping [13]behind the [14]competition in regards to its Full Self-Driving (FSD) capabilities.
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"As interest costs in the US have risen substantially, it has required us to adjust the price of our vehicles to keep the monthly cost in parity," Tesla CFO Vaibhav Taneja told investors yesterday. "We've tried to offset such adjustments via focus on reducing costs. However, there is an inherent lag in cost reductions, which in turn impacts margins."
Cybertruck'll distract 'em ... if expectations are kept low
Tesla's usual flagship product placement, its FSD tech, was [16]conspicuously absent from the call aside from some brief mentions during questions regarding its pricing, giving Musk a chance to flog another "upcoming" product: The much-delayed Cybertruck.
Problems have beset the boxy behemoth since it was [17]announced in 2019, and both the COVID-19 pandemic and Russia's attack on Ukraine, caused supply chain disruptions for multiple industries. That said, Tesla finally gave an [18]actual delivery date for the Cybertruck: November 30.
[19]Tesla knew Autopilot weakness killed a driver – and didn't fix it, engineers claim
[20]Thousands of Teslas recalled over brake fluid bug
[21]Tesla goons will buy anything – including these $150 beers
[22]Equal Employment Commission sues Tesla for racist discrimination, retaliation at Fremont plant
Whether this date will stick is anyone's guess, but several supposed Cybertruck launches have been missed, most recently in Q3, which Musk [23]said would happen in April on Tesla's Q1 2023 earnings call.
Even with the planned November delivery, Musk told investors to "temper expectations" for Cybertruck, the first of which only rolled off the assembly line [24]in July .
"Prototypes are easy, production is hard," Musk said, emphasizing that it'll take some time for Cybertruck production to reach volume or for the vehicle to become cash flow positive despite the fact that "over 1 million people [have] reserved the [Cybertruck]."
"It's a great product, but financially it will take, I don't know, a year to 18 months before it is a significant positive cash flow contributor," Musk claimed. "I wish there was some way for that to be different, but that's my best guess."
Musk said that he expects Tesla to reach a Cybertruck production capacity of 250,000 vehicles per year, but that's unlikely to happen until 2025. With more than one million supposed reservations, Cybertruck buyers can expect to be waiting a while.
The Cybertruck has also been hampered by [25]reports of poor quality, with misaligned panel gaps visible on pre-production models. Internal Tesla emails [26]leaked in August had Musk complaining about "any dimensional variation [showing] up like a sore thumb." Bear in mind this is after Cybertruck production reportedly began.
"All parts for this vehicle, whether internal or from suppliers, need to be designed and built to a sub-10 micron accuracy," Musk said in the alleged email to Tesla staff.
We'll know soon whether Tesla's [27]admitted quality control issues are resolved in regards to the Cybertruck – or perhaps not. Release dates have a habit of coming and going in Elon land.
"Special products that come along once in a long while are just incredibly difficult to bring to market," Musk told investors. "We dug our own grave with Cybertruck." ®
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[1] https://www.cnbc.com/2023/10/18/tesla-tsla-earnings-q3-2023.html
[2] https://ir.tesla.com/#quarterly-disclosure
[3] https://seekingalpha.com/article/4641696-tesla-inc-tsla-q3-2023-earnings-call-transcript
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2ZTGnDBrGwSzE6mkGrxv9awAAAUk&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZTGnDBrGwSzE6mkGrxv9awAAAUk&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[6] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33ZTGnDBrGwSzE6mkGrxv9awAAAUk&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[7] https://www.wsj.com/articles/elon-musk-calls-tesla-recession-resilient-as-wall-street-eyes-demand-11666302911
[8] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZTGnDBrGwSzE6mkGrxv9awAAAUk&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[9] https://www.theregister.com/2023/03/02/tesla_investor_day/
[10] https://www.theregister.com/2023/01/09/china_tesla_price_cuts/
[11] https://www.theregister.com/2023/09/08/ev_growth_gartner/
[12] https://www.theregister.com/2023/01/25/ford_gm_tesla_consumer_reports/
[13] https://www.theregister.com/2023/06/09/mercedes_california_tesla/
[14] https://forums.theregister.com/forum/all/2023/06/09/mercedes_california_tesla/
[15] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33ZTGnDBrGwSzE6mkGrxv9awAAAUk&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[16] https://www.theregister.com/2023/08/30/tesla_elon_mode_nhtsa/
[17] https://www.theregister.com/2019/11/22/smashing_tesla_cybertruck/
[18] https://twitter.com/Tesla/status/1714737600991248796
[19] https://www.theregister.com/2023/08/17/tesla_autopilot_engineers_claims/
[20] https://www.theregister.com/2023/10/17/55000_teslas_recalled_over_brake/
[21] https://www.theregister.com/2023/10/16/tesla_beer/
[22] https://www.theregister.com/2023/09/29/eeoc_sues_tesla_for_racist/
[23] https://seekingalpha.com/article/4595114-tesla-inc-tsla-q1-2023-earnings-call-transcript
[24] https://www.theregister.com/2023/07/17/first_tesla_cybertrunk/
[25] https://www.carscoops.com/2023/08/photos-of-tesla-cybertruck-panel-gaps-reveal-why-musk-was-worried/
[26] https://www.cnbc.com/2023/08/24/elon-musk-memo-on-cybertruck-manufacturing-challenges.html
[27] https://www.cnn.com/2021/02/03/business/elon-musk-tesla-quality-problems/index.html
[28] https://whitepapers.theregister.com/
Re: Accuracy
If I see the panel gaps on some Teslas I think the parts precision doesn't matter much when the people/robots assembling them apparently mark with chalk.
Dents
I wonder how dent resistant the cyber truck panels will be. Anyone with stainless appliances will know how awful dents look as a small dent warps reflections over a noticeably large area.
Re: Dents
You just have to predent dents dent dentsist.
Missed opportunity
To short Tesla stock
It's completely crazy to read that Tesla still doesn't seem to have its own financing options and is relying on external providers or even credit card debt. Literally every larger car manufacturer out there has its own bank(s). The Volkswagen Bank has a higher revenue than the car manufacturing branch.
If Elon had any sense, or listened to the people around him (who have no doubt pointed this out) he wouldn't just focus on a stupid online payment service. He would add a proper bank to his empire that handles credits for Tesla car buyers, online payments and much more. This bank would then have hundreds of thousands of customers from day one (Tesla buyers), people who all have to use his "everything app" (when does that one even start to make n appearance?) to manage their credits and might then be inclined to use it for payments, stock trading etc.
The man has zero creativity. There is just always SO much potential that stays behind.
Indeed. I remember reading a few years ago that GMAC (General Motors Acceptance Corp, now re-branded as Ally) was responsible for essentially all of GM's profits over a multi-year timeframe. They broke even on the cars and trucks, and made their money from the loans. From a financial perspective, the only reason they built cars and trucks at all was to generate loans.
Pretty much how all "durable" goods work nowadays from toasters to trucks.
The money isn't in making the Thing, its in loaning the cash to those who just have to have the Thing.
interest, shminterest
The main problems for Tesla are not interest rates, it's fuckawful build quality, stalled innovation, a major new product that's as attractive as a dog's arsehole and an arsehole owner (who is about as attractive as the cybertruck)
Re: interest, shminterest
Well, he's exploring new territory at the moment on model longevity, with the ageing Model S (largely unchanged since the prototype of 2009), the Model X eleven years old, and the Model 3 some seven years since unveiling. Most established makers understand the fickleness of buyers, the movement of technology, and the need to start planning the subsequent one before the next one is even launched, and the fact you really need to have complete model change around seven years.
If I were betting who'll be selling cars in 10 years time, I'd choose VW, Mercedes or even JLR over Tesla. I suspect the Tesla badge will live on in some format, but as an integrated car maker, nope. We'll see a fake "merger of equals" with somebody, Musk butt out, EV technology become commoditised, and Tesla will be fondly remembered as a pioneer that never quite made it. Maybe Tesla will end up like Ghia, declining from greatness to eventually becoming no more than a trim level on mass produced cars for pensioners.
Re: interest, shminterest
I was about to say 'or Saab', but Tesla has never risen to the level of quality and innovation present in those cars.
Re: interest, shminterest
Most Tesla buyers are fairly well off - upper middle class at least. The interest rate is not going to be an obstacle for someone who wants to buy one.
He's just making excuses because deep down he knows HE is specifically the reason for Tesla's problems. Since he's made it clear recently who he really is, it turns out he's not someone that many of the 'coastal elite liberals' who care about the environment that have been Tesla's primary customer base want to give their money to.
The MAGA crowd that loves him now doesn't believe in global warming and doesn't have any affinity for EVs. Many are actively against the idea and will say in surveys that will "never" consider an EV.
"Release Candidates" are out
Lots of "RC" Cybertrucks are out and about and they're not looking good. The original retro sci-fi polygon lines are starting to look more like "garage project." They also have major rework on them, which makes me think this is a Musky public relations stunt using old prototypes.
Accuracy
All parts for this vehicle, whether internal or from suppliers, need to be designed and built to a sub-10 micron accuracy
Good luck with that. Most shops in the West even struggle with 1mm accuracy.