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Tesla Q1 2023 Investment Note
Tesla's profit dropped 24% with margin compressed after global price cuts
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Key Takeaways:
Attitude: Tesla sees 2023 as a unique opportunity. As many carmakers are working through challenges with the unit economics of their EV programs, Tesla aims to leverage its position as a cost leader. The management pointed out that the current macro environment remains uncertain. Tesla reduced prices considerably in early Q1, but its operating margin remains among the best in the industry. The company has taken the view that pushing for higher volumes and a larger fleet is the right choice currently versus a lower volume and higher margin.
Guidance: The company continues to believe that its operating margin will stay among the highest in the industry. In 2023, the company expects to remain ahead of the long-term 50% CAGR with around 1.8 million cars. While continuing to execute on innovations to reduce the cost, over time, the company expects the hardware-related profits to be accompanied with an acceleration of software-related profits.
Product: Tesla is rapidly growing energy storage production capacity at Megafactory in Lathropand and recently announced a new Megafactory in Shanghai. The company is also continuing to execute on its product roadmap, including Cybertruck, the next generation vehicle platform, autonomy and other AI enabled products. Specifically, Cybertruck remains on track to begin production later this year at Gigafactory Texas. A great delivery event may probably be hosted in Q3. Regarding Autopilot and Full Self-Driving, Tesla has now crossed over 150 million miles driven by Full Self-Driving beta, with exponential growth. This provides a unique data advantage, crucial for achieving outstanding results.
Cost & Price Strategy: Tesla's near-term pricing strategy considers a long-term view on per vehicle profitability given the potential lifetime value of a Tesla vehicle through autonomy, supercharging, connectivity and service. Tesla expects product pricing will continue to evolve, upwards or downwards, depending on the number of factors. The company expects ongoing cost reduction of vehicles, including improved production efficiency at the newest factories and lower logistics costs, and remain focused on operating leverage.
Earnings Q&A
Q: How does the company view the overall sales situation this year? Can the goal of 2 million units be achieved?
Elon Musk: Optimistically, we can achieve 2 million units. We have previously mentioned information regarding capacity, production, and demand. There has been further progress in charging facilities, and vehicle owners have given positive feedback on charging facilities. We will also look at whether other non-Tesla vehicle owners can use them. In Europe, 50% of our charging facilities are open to all electric vehicles. In the coming years, Tesla will continue to make efforts in North America and China.
Elon Musk: Optimistically, we can achieve 2 million units. We have previously mentioned information regarding capacity, production, and demand. There has been further progress in charging facilities, and vehicle owners have given positive feedback on charging facilities. We will also look at whether other non-Tesla vehicle owners can use them. In Europe, 50% of our charging facilities are open to all electric vehicles. In the coming years, Tesla will continue to make efforts in North America and China.
Q: What is the subscription rate for FSD? The vehicle has been reduced in price. Does FSD need to be adjusted accordingly?
Elon Musk: The details of the FSD subscription rate will not be disclosed for the time being. In terms of pricing, FSD provides tremendous value to the car and the current price provides an option-like value. FSD will significantly improve the driving experience, and Tesla's FSD is constantly advancing towards fully autonomous driving.
Elon Musk: The details of the FSD subscription rate will not be disclosed for the time being. In terms of pricing, FSD provides tremendous value to the car and the current price provides an option-like value. FSD will significantly improve the driving experience, and Tesla's FSD is constantly advancing towards fully autonomous driving.
Q: Regarding the 4680 battery cell, how far away are we from achieving the goals revealed on Battery Day?
Andrew Baglino: By 2026, the cost of the 4680 battery cell will be further reduced, and there is still work to be done in various aspects. For the battery factory, the Texas 4680 factory has completed part of the construction and commissioning. Sales and operations will be 70% lower in capital expenditure per megawatt-hour compared to typical battery factories when fully launched, consistent with what we described on Battery Day. There is also further consideration for battery cell design. In terms of lithium refining, our refining factory will start construction in May this year, and the goal is to start commissioning some facilities by the end of this year. We will also consider reducing process costs and optimizing testing processes.
Andrew Baglino: By 2026, the cost of the 4680 battery cell will be further reduced, and there is still work to be done in various aspects. For the battery factory, the Texas 4680 factory has completed part of the construction and commissioning. Sales and operations will be 70% lower in capital expenditure per megawatt-hour compared to typical battery factories when fully launched, consistent with what we described on Battery Day. There is also further consideration for battery cell design. In terms of lithium refining, our refining factory will start construction in May this year, and the goal is to start commissioning some facilities by the end of this year. We will also consider reducing process costs and optimizing testing processes.
Q: How does Tesla view the expected gross margin for automotive in 2023?
Zachary Kirkhorn: We will fully consider the current environment, observe changes in costs, take corresponding control measures, reduce most costs, accelerate the production ramp of the Austin factory, and optimize costs. Once the production volume reaches expectations, we will continue to optimize costs from other perspectives. Each factory will consider local KPIs and some uncontrollable factors, such as logistics costs. The company team has made many optimizations. Commodity prices are a major factor in optimizing the company's cost structure, and we will track changes in commodity prices.
Zachary Kirkhorn: We will fully consider the current environment, observe changes in costs, take corresponding control measures, reduce most costs, accelerate the production ramp of the Austin factory, and optimize costs. Once the production volume reaches expectations, we will continue to optimize costs from other perspectives. Each factory will consider local KPIs and some uncontrollable factors, such as logistics costs. The company team has made many optimizations. Commodity prices are a major factor in optimizing the company's cost structure, and we will track changes in commodity prices.
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Disclaimer
This article is a script from the TSLA Q1 FY23 earnings conference call. In order to facilitate reading, we have made appropriate cuts and revisions. This presentation is for information and educational use only and is not a recommendation or endorsement of any particular investment or investment strategy. Before investing, please consult a licensed professional. See this link for more information.
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markg : I do believe that Tesla stock will be very profitable in the long and short term,,big things coming from Elon and his team
Burtis markg : Why’s that ?
Souxiesue : Long time supported and believer of Tesla. I guess owning stock makes it more official? I’m pretty confident in Elons work and Tesla seems strong in these skeptical times. One thing I’m pretty sure of is teslas efficiency… and innovative out looks
I’m in it for the long term for sure… maybe not putting all my eggs in one basket but man these bank crisis are getting sour. So yeah … hahaha tesla YAAAAZZZ !!
Grantf Souxiesue : The only
Dchris : For sure Tesla stock will rise again, I’m pretty confident in Elon and Tesla, long term shares
71360894 : Too many people are buying, so naturally, the cost of ownership in the market will increase.
71360894 : It's actually very simple. The Tesla company hasn't changed. It's always been so good, and it's always getting better and better, but why did the stock price go from 340 to 100? And why from 100 to 200? And why did it go from 200 to 160 now?
71360894 : The so-called economic crisis, bank bankruptcy, delivery volume, profit margins are all deceptive. Try it, use today's price, whether you buy or sell, hold it, and will it still be this price in the process? So, do all of the above factors have anything to do with the price in the process?
71360894 : Any stock is the same, that is, the price at which it was bought or sold; everything else is deceptive.
71360894 : I also know that Tesla is definitely going to rise, but I also know that Tesla is definitely going to fall. Just 10 minutes ago it fell, and 2 hours ago it went up!
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