Tesla’s third quarter financial report summary! Musk says Tesla will stick to price reductions

Highlighting Tesla's Q3 Financial Results Musk Commits to Continued Price Reductions

【PhoneAuto】On October 19, Tesla held its third-quarter earnings conference call. In addition to announcing its Q3 earnings, Musk revealed a lot of other information.

Musk

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Despite a gradual decrease in profit margins due to lower average selling prices and increased operating costs, Tesla’s revenue still grew by nearly 9% compared to the same period last year.

This electric vehicle manufacturer achieved profitability once again, making it 16 consecutive profitable quarters for Tesla. However, Tesla did not meet expectations in terms of earnings per share and revenue.

In the third quarter, Tesla’s revenue was $23.35 billion. Analysts predicted Tesla’s revenue for Q3 2023 to be $23.9 billion. Despite the challenges, total revenue in Q3 grew by 9% year-over-year.

Tesla’s operating profit margin for Q3 was 7.6%. Q3 GAAP operating profit was $1.8 billion, GAAP net profit was $1.9 billion, and non-GAAP net profit was $2.3 billion.

Tesla’s operating cash flow in Q3 was $3.3 billion, and free cash flow was $800 million. Tesla’s cash and investment balance increased by $3 billion to $26.1 billion during the quarter.

In other news, Tesla announced that the cumulative mileage of its FSD Beta program has reached 525 million miles. Tesla Energy became the dark horse this quarter with a record-breaking energy storage deployment of 4.0GWh (gigawatt-hours).

Tesla’s main objectives for Q3 2023 remain unchanged: reducing per vehicle cost, generating free cash flow, maximizing deliveries, and continuing to invest in growth projects like artificial intelligence.

During the conference call, Musk first discussed Tesla’s progress in autonomous driving. He noted that he sees great potential in FSD Beta V12, which is an end-to-end solution. “We will continue to heavily invest in the development of artificial intelligence,” Musk said.

Musk also pointed out that Tesla Energy and Services now contribute over $500 million to quarterly profit. It is becoming one of the company’s most profitable businesses and growing rapidly.

Cybertruck will have its first global deliveries on November 30.

Musk emphasized that while the Cybertruck will be unveiled this quarter, there must be expectations set for the production ramp of the vehicle. “To achieve mass production and positive cash flow, there will be enormous challenges. It’s our best product ever, but it takes tremendous effort to make it affordable to people and bring positive cash flow.”

“I just want to adjust expectations for the Cybertruck. It’s a great product, but financially, it will take a year to a year and a half to become a significant cash flow contributor,” Musk said.

Musk also reiterated Tesla’s guideline of producing 1.8 million cars by 2023.

Tesla’s new CFO, Vaibhav Taneja, discussed the company’s financial situation. He mentioned that despite some factory closures, the cost per vehicle has dropped to about $37,500. He also talked about Tesla’s commitment to cost reduction and future investments to tackle upcoming challenges.

When asked about expectations for the Cybertruck in 2024, Elon Musk pointed out that due to the truck’s uniqueness, it’s difficult to predict its performance. Of course, if the Cybertruck were just a replica of other pickup trucks, the situation would be different. “The more unknown the field, the more unpredictable the results,” Musk said.

Musk did express that Tesla ultimately aims to produce around 250,000 Cybertrucks per year. This goal may be achieved by around 2025.

The second question from an investor asked about the latest updates on the company’s 4680 battery plan. Tesla stated that waste has been reduced by 40%, and production is gradually increasing.

Someone asked about the situation with the Shanghai Gigafactory, the Berlin Gigafactory, and the Mexico Gigafactory. Tesla mentioned that they are building new production lines for the next generation of vehicles at the Mexico Gigafactory.

Musk pointed out that Tesla is actively involved in advertising. He admitted that advertising is useful, but if people can’t afford Tesla’s cars, advertising won’t have much effect. Musk emphasized his concern about interest rates and highlighted Tesla’s focus on reducing the importance of monthly payments.

Someone asked about Tesla’s growth rate. Elon Musk pointed out that Tesla is one of the fastest-growing car manufacturers today. As for the Robotaxi (self-driving taxi), Musk emphasized that the vehicle will definitely be autonomous. He particularly emphasized his excitement about autonomous driving, with Tesla’s work in this area paving the way for Optimus Prime.

Someone asked about the price reduction of Tesla’s Full Self-Driving (FSD) system. Musk pointed out that Tesla simply wants to make the system more affordable. He called the current price a temporary low point. “Well, we just want to make it cheaper,” he noted.

Later, someone asked when Tesla will take legal responsibility for FSD. Musk jokingly said that everyone thinks Tesla has legal responsibility. The team also emphasized that L3 systems like Mercedes-Benz Drive Pilot are very limited, while Tesla’s FSD system is comprehensive. “It’s baby-level artificial intelligence,” Musk said.

However, Musk pointed out that the availability of FSD outside of the US is determined by different countries’ regulations. He also admitted that he was too optimistic about Tesla’s progress with FSD.

Someone asked about Optimus and whether some robots could be deployed next year. Musk pointed out that Tesla is not yet ready to discuss updates to the Optimus plan. But Optimus is constantly improving and improving quickly.

Elon Musk pointed out that the production of the Cybertruck will gradually increase over the next 18 months. Therefore, although it may seem like it will take 3 years for the vehicle’s production capacity to climb, it is actually only 1.5 years.

The team pointed out that the Cybertruck has some unique complexities that affect production growth. “We dug ourselves a hole,” Musk joked. “The Cybertruck has many fancy features.”

Musk pointed out that Tesla’s next-generation platform is somewhat more traditional in a sense. The next generation of vehicles doesn’t have as many new things. Tesla is doing everything possible to simplify the next generation of vehicles to achieve levels of production per minute. Musk also noted that the next generation of Tesla models are “practical, but cool and beautiful.”

However, Musk did not reveal any information about the release date of the next generation of cars. Musk pointed out that Tesla is currently not providing information in this regard.

Someone asked a question about price elasticity. Elon Musk emphasized that what ordinary consumers care about is the payment issue. He also reiterated the importance of Tesla’s focus on reducing monthly payments.

“I think price elasticity is very important. Frankly, if our cars were as expensive as the Toyota RAV4, nobody would buy the RAV4. Or at least they’d be less likely to. A lot of electric vehicle incentives are actually difficult for regular people to obtain; they can’t even pay $7,500 (approximately RMB 55,000) within 6 months,” Musk said.

Musk briefly discussed the “Marie Antoinette atmosphere” in car pricing (Marie Antoinette, the wife of King Louis XVI of France, is most famous for her supposed response when told that the French people had no bread to eat, she reportedly said, “Let them eat cake.” Historically, Marie never actually said this, but blame for the famine was placed on her due to her extravagant lifestyle).

To emphasize this point, Musk talked about his disdain for remote working systems, pointing out that it is unfair for those who have to go to the workplace to work.

An analyst also asked about whether some Model Y vehicles in China are equipped with radar. Elon Musk pointed out that Tesla does not equip radar on the Model 3 and Model Y produced at the Shanghai Gigafactory. Tesla is experimenting with radar on Model S and Model X, but currently has no plans to do so for Model 3 and Model Y.

Elon Musk did mention that Tesla is indeed studying the usability of radar in accident prevention. He stated that previous vehicles equipped with radar actually generated more noise than signals.

Wells Fargo Bank requested clarification on Elon Musk’s previous comments about Tesla not fully investing in the construction of the Mexican Gigafactory. Musk pointed out that Tesla will indeed build a factory in Mexico, it’s just a matter of time. Tesla is still working in Mexico, but the company is closely monitoring interest rates.

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