Life,  Tech

Elon Musk: Lowering Tesla’s Costs is a Penny Game and Feels Like Digging a Tunnel with a Spoon

  Musk said lowering Tesla’s costs is a game of pennies and “sometimes feels like digging a tunnel with a spoon.”
  During Tesla’s third quarter 2023 earnings conference call, Tesla CEO Elon Musk repeatedly mentioned the negative impact of high interest rates on consumer confidence.
  ”Tesla is a very powerful ship, but in a storm, no matter how strong the ship is, there will be trouble.” The storm in Musk’s mouth refers to the high interest rate environment in the United States that has led to an increase in the monthly payment cost of car loans, even if Tesla Lowering prices does not make buying a car any cheaper for consumers.
  Musk said that many people live paycheck to paycheck and have a lot of debts, such as credit card loans and mortgages. This is the reality for most people. For high-income earners making over $200,000 a year, it’s sometimes hard to fathom what life is like for most people making $50,000, $60,000, or $70,000 a year. Although Tesla has lowered its selling price, for consumers, the price of Model Y has “little changed” due to higher borrowing costs. Therefore, the importance of cost cannot be overemphasized, and cars must be made more affordable and affordable for people.
  ”If you have a $40,000 car and there are about 10,000 parts in it, that means each part costs an average of $4. So, to reduce the cost by, say, 10 percent, you have to start from zero per The average savings on parts is 40 cents,” he said.
  Tesla said, “We have always believed that an industry leader must be a leader in cost control.” In order to further reduce unit costs, Tesla implemented necessary production line upgrades in the third quarter, and the cost of a single vehicle has dropped to US$37,500 in the third quarter.
  In the past year, Tesla has repeatedly lowered global product prices, which has resulted in significant growth in sales. Data shows that Tesla’s total vehicle delivery volume in the third quarter of 2023 was 435,059 vehicles, an increase of 27% compared with 343,830 vehicles in the same period last year; a total of more than 1.324 million electric vehicles have been delivered in the first three quarters, exceeding the total of 131.4 million vehicles in 2022. Thousands of vehicles. Tesla said that total deliveries this year will be around 1.8 million vehicles.
  Currently, Tesla remains the world’s most valuable automaker, and Musk’s wealth has increased by more than $70 billion in 2023.
  However, analysts are quite concerned about the impact of Tesla’s price cuts on the company’s profit margins.
  According to the latest financial report, Tesla’s total revenue in the third quarter was approximately US$23.4 billion (approximately RMB 171.2 billion), a year-on-year increase of 9%; according to U.S. GAAP, net profit attributable to ordinary shareholders was US$1.853 billion, a year-on-year increase of 9%. down 44%. The gross profit margin in the second quarter of this year was 18.2%, and the gross profit margin in the third quarter further dropped to 17.9%, while the gross profit margin in the same period last year was 25.1%.
  Talking about the reasons for the decline in profits, Tesla said that on the one hand, the company upgraded its factories and reduced production, resulting in a sharp decline in deliveries. On the other hand, it is investing heavily in artificial intelligence and has “launched one of the world’s largest supercomputers,” doubling its computing power compared to the previous quarter.
  Currently, Model 3 and Model Y are Tesla’s sales pillars, and these two models will still need to shoulder the heavy sales responsibility in the next one or two years. It is understood that Cybertruck and a cheaper model (rumored to be Model 2) may not bring incremental growth to Tesla until 2025.
  Tesla said that Cybertruck deliveries will begin on November 30. This pure electric pickup truck, released as early as 2019, has finally entered the mass production process.
  Musk has previously said that Cybertruck is Tesla’s “best product ever.” He said that Cybertruck has received orders for 1 million vehicles, but currently does not have the ability to deliver large-scale deliveries. It is expected that it will barely achieve an annual production of 250,000 vehicles by 2025.
  It’s a great product, he said, but from a financial perspective it will take a year to 18 months to achieve significant positive cash flow. High-volume, low-cost, smaller vehicles are actually more in line with the norm. He said that he is doing everything possible to simplify the car “in order to achieve a production rate unheard of in the automotive industry.”
  The car he is talking about is the legendary Model 2. In fact, the outside world is really looking forward to this small car that is mainly “people-friendly and practical”. Foreign media said that the price of this small model is expected to be less than 25,000 US dollars, which is equivalent to about 180,000 yuan in RMB. The governor of Mexico’s Nuevo León state said in early July that the car was in the final stages of new car design and that the company had finalized the production line, software and everything in preparation for starting the factory.
  Tesla believes that in a high interest rate environment, while maintaining positive free cash flow, the right approach is to focus on R&D and capital expenditures that can support future growth. It has increased the amount of artificial intelligence training calculations to more than 2 times to Adapting to growing data volumes and the Optimus Robotics project.
  ”A year ago Optimus could barely walk, but now it can do yoga, and in a few years it may even do ballet,” Musk said.

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