Tesla shares slumped sharply on Wednesday (US time) as the EV and battery storage giant missed targets on revenue, margins and profits, and as CEO Elon Musk have a downbeat assessment on the economy.
The results for the 3rd quarter and Musk’s comments in the following earnings call confirm what many in the market believe – that the company’s future growth will be based around subscription services and autonomy, and the business model will bear little resemblance to the traditional car company.
“I will continue to invest significantly in AI development, as this is really the massive game changer,” Â Musk said in the call, in reference to the company’s development of Full Self Driving and the Optimus humanoid.
“Success in this regard in the long term I think has the potential to make Tesla the most valuable company in the world by far. If you have fully autonomous cars at scale, and fully autonomous humanoid robots that are truly useful, it’s not clear what the limit is.”
For the moment though, analysts and investors think of Tesla along more traditional lines, which is why its shares fell nearly five per cent after its third quarter revenue of $US23.4 billion came in below analyst expectations of more than $US24 billion, and net profit was down 40 per cent to $US1.9 billion. Operating margins slumped to 7.6 per cent.
Tesla has slashed the cost of production of its EVs, but has been forced to slash the price of its most popular cars – the Model Y and the Model 3 – even further over the past year to make sure demand and deliveries match its production target of 1.8 million cars for 2023. It’s even had to cut the price of its Full Self Driving product by $US3,000.
The company finally served up a date for the first deliveries of its long awaited Cybertruck – November 30 this year – but warned that the complications of producing a radically different vehicle meant that it would be a long road to full production and profitability.
At the rate of production, 125,000 in the first year and 250,000 by mid 2025, some of its touted one million customers might have to wait another four years for their delivery.
Musk was also concerned about the state of the global economy, and high interest rates. He cited those factors for the decision to slow down the ramp up of its new Mexican gigafactory, and expressed concern about the ability of many customers to afford new cars.
“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. I’m worried about the high interest rate environment that we’re in,” he said.
“The big question is if this is just a blip, or signs of a bigger shift among consumers as rising interest rates and a weaker economic backdrop discourage consumers from making big-ticket purchases.”
But FSD, and the emergence of robo-taxis, and humanoid robots, is no doubt where Musk sees the future, even if most analysts remain skeptical and find it impossible to value in any meaningful way.
“It drives me all round Austin, and there were no interventions,” he said of his own use of FSD in the Texas city that now hosts the company’s headquarters. “So yeah, this is clearly the right move. It’s really pretty amazing. And obviously that same software and approach will enable Optimus to do useful things.
“I don’t think anyone is going to do it better than Tesla, not by a long shot.”
Giles Parkinson is founder and editor of The Driven, and also edits and founded the Renew Economy and One Step Off The Grid web sites. He has been a journalist for nearly 40 years, is a former business and deputy editor of the Australian Financial Review, and owns a Tesla Model 3.