Cybertruck is finally hitting the streets: Will it be a win for Tesla?
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Tesla's Future Outlook: What Could Bring Good or Bad News for the Company
While investors are optimistic about the company's growth potential, there are still uncertainties about its ability to deliver on its promises. Against this backdrop, many are wondering: what factors could impact Tesla's future positively or negatively?
Potential Good News:
Tesla Targets Record Q4 Delivery
Tesla is aiming to meet its target of delivering 1.8 million vehicles by 2023, with China insurance registrations suggesting that deliveries for Q4 may be similar to those of Q3. Tesla has introduced a new Model 3 in China, with sales beginning on October 19th, and has started delivering the "Highland" Model 3 in China and Europe. As of Q3, Tesla delivered about 1.324 million vehicles globally this year, needing roughly 476,000 deliveries in Q4 to reach their goal. Tesla reiterated its 1.8 million vehicle delivery goal in its third-quarter earnings.
Cybertruck & Semi Hauler Hype
Tesla held its Cybertruck delivery event on November 30th, with Elon Musk handing over 12 trucks of uncertain ownership. The all-wheel drive and top-tier "Cyberbeast" versions will be available in 2024, with estimated prices starting at $79,900 before IRA tax credits and ranges of 340 miles and 320 miles respectively.The base, real-wheel drive Cybertruck won't be available until 2025 and has an estimated starting price of $60,900 before tax credits with a range of 250 miles. Tesla will offer a "range extender" battery that takes up most of the truck bed. There were no production or delivery expectations announced for the Cybertruck, and ramping up production is expected to be extremely difficult.
Tesla AI Strategy
Analyst Michael Tyndall wrote that Tesla vehicles may well be the main driver of revenue and profits currently, but the future for Tesla is about robots, autonomous vehicles, energy storage and supercomputers.
We see considerable potential in Tesla's prospects and ideas, but we think the timeline is likely to be longer than the market and valuation is reflecting," Tyndall wrote.
In terms of operating expenses, Tesla's R&D spending continued to rise due to Cybertruck prototype builds and pilot production testing combined with spend on AI technologies like full self-driving, Optimus and Dojo," CFO Vaibhav Taneja said during the October 2023 earnings call. "We have and will continue to make investments in these areas, and hence our capital expenditure and R&D will continue to grow in the near term."
• Optimus Robots: Tesla announced its Optimus humanoid robot effort, also known as Tesla Bot, at the company's AI Day in August 2021. Elon Musk estimates that it could be available for sale between 2025 and 2027. Critics have dismissed Tesla Optimus as hype, but Musk continues to sell his long-term robotics vision.
During the October 2023 earnings call, Musk said: "Optimus a year ago could barely walk and now it can do yoga. So, a few years from now, it can probably do ballet." If eventually shipped, Tesla's humanoid robots could face competition from companies such as Boston Dynamics, which was acquired by Hyundai Motor Group in June 2021. However, Musk believes that nobody will do it better than Tesla and points out that designing a mass-manufactured humanoid robot with a brain is crucial.
• Tesla's Full Self-Driving (FSD): Elon Musk has consistently praised Tesla's Full Self-Driving (FSD) technology and its potential value to the brand. The company recently began rolling out its FSD beta for new vehicles that use Hardware 4, which contains more ports for data-collecting cameras. Musk demonstrated the technology in a live-streamed 45-minute drive around Palo Alto using "FSD v12 beta" on August 25, though he had to intervene once when his vehicle tried to run a red light.
On September 1, Tesla reduced the price of FSD in the U.S. from $15,000 to $12,000. Meanwhile, the National Highway Traffic Safety Administration is nearing the end of its two-year investigation into Tesla's driver-assist systems Autopilot and Full-Self Driving, according to Reuters' report on August 24.
• Tesla Dojo: Tesla has been mentioning how Dojo gives it an edge in AI and self-driving technology since at least 2021. In July this year, CEO Elon Musk told investors that the carmaker plans to invest more than $1 billion on the project by the end of 2024.
Elon Musk has previously made significant claims about advancements in autonomous driving, such as predicting that there would be one million Tesla robotaxis by the end of 2020. By creating its machine learning chips and Dojo infrastructure, Tesla could save money on training the AI systems that power FSD. This could allow the company to enhance its driving algorithms using the real-world data collected from Tesla vehicles, which its competitors lack.
However, it is difficult to predict whether these improvements will lead to a breakthrough moment in autonomous driving or computer vision more broadly.
Potential Bad News:
Tesla's Q3 earnings report showed that the company's earnings per share had dropped by 37% to 66 cents, while revenue increased by 9% to $23.35 billion. Additionally, auto gross profit margins, excluding regulatory credits, fell to 16.3%. This was below Tesla's targeted gross margin of 20%. CEO Elon Musk cautioned investors about the Cybertruck and the broader economy during the earnings call and TSLA shares fell by 9.3% the following day.
Tesla's Global Price Cutting Strategy
Throughout 2023, Tesla has cut prices worldwide multiple times to maintain sales momentum. The company has slashed prices aggressively to drop vehicle prices below the 20% gross profit margin target.
This includes reducing prices for U.S. Model 3 and Model Y vehicles and dropping standard range Model S and Model X versions. Additionally, Tesla has cut prices in several European markets and other countries like Israel and Singapore. To increase demand, the company offered limited-time insurance subsidies and almost doubled discounts on luxury Model S and Model X vehicles in China.
X Advertisers Exit
Industry experts suggest that social media company X may see more advertisers leaving without a clear solution in sight, following Elon Musk's criticism of some of the platform's biggest brands. In response to Musk's endorsement of an antisemitic post that falsely accused Jewish community members of inciting hatred against white people, $Disney(DIS.US)$ and $Warner Bros Discovery(WBD.US)$ suspended advertising on X. While speaking at a New York Times DealBook event, Musk apologized for his post but then went on a profanity-laced tirade against advertisers for abandoning the platform, accusing them of "blackmail."
The Tesla chief also acknowledged that an extended boycott by advertisers could bankrupt X, formerly Twitter, but suggested that the public would blame the brands and not him for a potential collapse. However, Insider Intelligence analyst Jasmine Enberg said: "If anyone is killing X, it's Elon Musk - not advertisers."
Source: Investor's Business Daily, The Motley Fool, Sustainable Tech Partner, REUTERS, Fortune
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