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Tesla’s Q3 Results: Margins Dip, Production Soars
– Tesla reported a total revenue of $23.35 billion for the recent quarter; $19.6 billion of this was from the automotive division.
– Sales have increased by 9% compared to Q3/2022, but failed to surpass the record sales of Q2/2023 which was $24.93 billion.
– The revenue observed this quarter was $1.5 billion less than the previous quarter, aligning with the revenue of the initial three months of the year.
– Tesla’s GAAP profit for the past three months is $1.85 billion, marking a 44% decline year-on-year. For context, it was $3.29 billion in Q3/2022 and $2.7 billion in Q2/2023.
– The highest quarterly profit Tesla has ever posted was in Q4/2022; the current profit is approximately half of that amount. Tesla’s operating margin for the current quarter stands at 7.6%. This is a significant drop from 17.2% in the same quarter the previous year. To illustrate the trend, margins were at 16% in Q4 the prior year and 9.6% in Q2/2023.
– A primary reason for the dropping margins is Tesla’s worldwide price cuts, notably after the company reduced prices in major markets like China, Europe, and the US recently.
– Elon Musk expressed the need to “temper expectations” concerning the production of the Tesla Cybertruck.
– Despite these concerns, Tesla previously indicated their manufacturing capabilities, stating they can produce upwards of 125,000 Cybertrucks on an annual basis.
– Tesla’s capacity has also been ramped up in Shanghai (from 750,000 to over 950,000 units) and Berlin (from 250,000 to 375,000 units). Their Fremont production stands at 650,000 vehicles.
– Altogether, Tesla’s total vehicle production capacity has surged from 1.9 million to 2.35 million EVs annually.
Musk Highlights Cybertruck Production Challenges
– Elon Musk addressed the unique production techniques associated with the Tesla Cybertruck, attributing them to the vehicle’s unprecedented design features.
– Commenting on the distinct design of the pickup, Musk mentioned, “I do want to emphasize that there will be enormous challenges in reaching volume production.”
– He projected that by 2025, the annual production of the pickup would achieve 250,000 units.
– Currently, the Cybertruck has approximately 1 million reservations.
– In terms of affordability, Musk stated that the automaker aims to keep the truck’s price reasonable. However, the integration of new technologies in the Cybertruck complicates the cost factor.
– Musk confirmed Tesla’s target to manufacture 1.8 million vehicles this year. However, during the recent earnings call, he seemed uncertain about maintaining a 50 percent growth in global volume annually for the coming years.
– Musk highlighted that creating entirely new models often comes with challenges, something Tesla has faced in the past with product design and release.
– The Tesla CEO remarked, “This is simply normal for when you’ve got a product with a lot of new technology, or any brand new vehicle program, but especially one that is as different and advanced as the Cybertruck.” He stressed the proportional relationship between the novelty of a product and the scale of production issues.
– Musk maintained optimism, stating, “I think this is potentially our best product ever… [but] it’s going to require immense work to reach value production and be cash flow positive at a price that people can afford.”
– A significant challenge Tesla has encountered with the Cybertruck is the use of stainless steel. This material is known to be tough to work with consistently in the automotive sector, particularly in terms of reliable manufacturing.
– Despite these production hiccups, the Cybertruck remains highly anticipated. It has consistently been a focal point of media and consumer attention, marking it as one of the standout vehicle debuts of the decade. However, its release date has been postponed several times.
Musk Voices Concerns Over Gigafactory Mexico Timelines
– Elon Musk has highlighted challenges regarding the Gigafactory Mexico project, citing interest rates and global economic conditions as potential impediments.
– Musk confirmed that Tesla is initiating preparations for the construction of the facility near Monterrey, Mexico. Despite earlier projections indicating that the electric vehicle (EV) production plant would commence operations in 2025, current economic uncertainties have cast doubts over this timeline.
– Elaborating on the progress, Musk mentioned, “For Mexico, we’re working on infrastructure and factory design in parallel with the engineering development of the new production [line] that we will be manufacturing there.” He expressed the company’s intention to carefully gauge the global economic scenario before diving deep into the Mexican venture.
– Musk’s primary concern revolves around the prevailing high-interest rate environment, which could impact the project’s feasibility. An inquiry from a Wells Fargo analyst led Musk to discuss Tesla’s strategic decisions related to the Mexico Gigafactory. Specifically, the analyst sought clarity on Tesla’s hesitant approach towards committing fully to the Mexican plant in light of economic uncertainties. The question also revolved around whether Tesla could still maintain its ambitious goal of a 50% compound annual growth rate without the new production facility.
Tesla Solar Slips, Energy Storage Soars
– Solar installations by megawatt are currently leading in the U.S. energy market for the year.
– Tesla, which was previously among the top three residential solar installers, is seeing a downturn in its solar business.
– In Q3, Tesla’s solar deployments stood at 49 MW, marking a 48% drop compared to the same timeframe the previous year.
– There has been a noticeable sequential decline in Tesla’s solar deployments, descending from 67 MW in Q1 2023 to 66 MW in Q2, and further sliding to 49 MW in Q3.
– Tesla’s ambitious vision for solar roofs seems to be fading based on these figures.
– However, not all is gloomy for the automaker. Tesla’s energy storage deployments witnessed a substantial surge.
– In the third quarter, the company reported an impressive 90% increase in energy storage deployments, reaching nearly 4 GWh. This is a significant rise from the 2.1 GWh reported in Q3 of 2023.
– Tesla proudly dubbed this as its “highest quarterly deployment ever.”
– The surge in energy storage deployments has been attributed to the progressive scaling of Tesla’s Megafactory located in Lathrop, CA.
Musk Critiques Work-from-Home Mindset on Tesla Call
– During Tesla’s Q3 earnings call, CEO Elon Musk shared strong opinions on those opting for remote work.
– Musk expressed his view that people working from home are taking advantage of those who don’t have that luxury, suggesting they are “detached from reality.”
– Amidst discussions about the potential impact of rising interest rates on vehicle affordability, Musk unexpectedly touched upon the topic of working from home.
– He alluded to the disconnect and “Marie Antoinette” attitude of people questioning why everyone doesn’t work remotely.
– Musk exemplified his point by mentioning factory workers who produce vehicles and those in the food industry who prepare and deliver meals, implying that not all jobs are suited for remote work.
Chinese Tesla Suppliers Pouring $1B into Mexican Gigafactory Zone
– Two of Tesla’s suppliers from China, Ningbo Tuopi Group and Hesai Technology, are planning to invest nearly $1 billion in Mexico.
– The combined investment from these suppliers will amount to $960 million.
– This announcement follows recent news that Tesla has secured the required Environmental Impact Permits for the initiation of its Gigafactory construction in Mexico.
– Signs of the impending construction were evident with construction machinery being spotted in the vicinity in August.
– To facilitate the construction and operation of the Gigafactory, Tesla has reached out to the Mexican government to ensure necessary infrastructure such as energy, water, roads, and railways.
– Once fully operational, the Giga Mexico factory is anticipated to be the production hub for Tesla’s upcoming sub-$30,000 vehicle.
– Production for this eagerly awaited model is slated to commence in the first quarter of 2025.
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