Elon Musk has thrown down the gauntlet to the legacy car industry, saying that Tesla could sell its electric cars at “zero profit” and make money on autopilot technology, something he says other car makers would be unable to match.
Tesla is making a big play in 2023 in cutting costs, and prices of EVs. This is partly due to improved production techniques and lower input costs such as lithium, but it is also as much about the future of the car industry.
Tesla has been enjoying stella margins of more than 20% on its EVs, but is also facing increased competition from other EV specialists such as BYD. Its multiple price cuts in the US, China and Australia is as much about protecting its own market share as putting pressure on the rival car makers.
“There is there’s quite a powerful story here,” said Musk told investors during the Q1 earnings call.
“Tesla is in a uniquely strong strategic position because we’re the only ones making cars that technically we could sell for zero profit for now and then yield actually tremendous economics in the future through autonomy. No one else can do that.
“Not sure how many of you will appreciate the profundity of what I’ve just said, but it is extremely significant.”
Indeed, some analysts say what Tesla achieving through improved manufacturing and changing business models is as profound as the impact Ford had with its original Model T. Even greater.
There is speculation that Tesla will soon release a much cheaper EV as low as $US25,000, but Musk this week chose only to refer to the “next-gen” car which will be akin to a “robo-taxi” and able to be driven entirely autonomously.
Tesla late Wednesday (US time) announced first quarter revenue of $US23.617 billion, operating income of $US2.7 billion, and earnings of $US0.85 per share, which was more or less in line with estimates. It still returned an impressive gross margin of 19.4 per cent.
In the first quarter, the Model Y became the best selling vehicle of any kind in Europe and the best selling non-pickup vehicle in the US, and Tesla also flagged first deliveries of the Cybertruck will be made at an event in the third quarter of the year.
The other big news from the earnings call was Musk’s promise to invest in lithium ore refining, and news of a 25 per cent reduction in costs on its new 4680 battery cells which are produced at its Texas Gigafactory.
Musk also pleaded for more companies to invest in lithium refining suggesting that the refining of lithium, not mining, was the current bottleneck.
Tesla says that there’s been a dramatic decrease in lithium carbonate pricing from $US85,000 a tonne and today’s spot price is about $26,000 per tonne. Tesla says that at the quantities they’re procuring, they’re not as impacted by the spot market because they have long-term contracts in place.
One questioner asked whether the dramatic change in commodity prices was due to any recent overcapacity in mining and refining?
Daniel Bleakley is a clean technology researcher and advocate with a background in engineering and business. He has a strong interest in electric vehicles, renewable energy, manufacturing and public policy.
I bought my EV in 2019, and after a honeymoon of free public charging I…
Tesla's upcoming software update to increase safety for owners and their vehicles along with adding…
German study finds clear difference in number of breakdowns between internal combustion engine cars and…
They are sold as vehicles that will cut petrol consumption, but tests on Australian roads…
SAPN is official treating V2G vehicles as batteries, as other energy distributors race to figure…
It costs me just $2.40 to travel the 400 kms from Melbourne to Apollo Bay…