The recent Q3 results from Tesla hinted at a delay in the production of its keenly awaited Cybertruck, mirroring a similar delay experienced in the production of Model X. This revelation during Tesla’s Investor Relations (IR) call unsettled shareholders, a sentiment heightened by the fact that the company missed its earnings and revenue targets for the first time since Q2 2019. This unexpected dip in performance has raised eyebrows considering the bullish Q3 expectations that were projected.
Understanding the Dichotomy between Expectations and Reality
Shareholders and financial pundits were taken aback by the rather sombre tone of the IR call presided over by Tesla CEO Elon Musk. As Musk reiterated the need for affordable products and the implications of high interest rates for consumers, shareholders were left pondering the reality of the market versus the projected performance of the company. Widespread concern at the company’s underperformance even stirred up a sense of worry among Tesla owners and enthusiasts.
Where Did Tesla Fall Short?
Tesla was expected to see a 50% annual growth on the back of its aggressive global expansion, with the number of its auto assembly plants. However, the company failed to achieve this growth rate in 2022 and is not expected to meet these targets this year either. The projections for 2024 do not paint a rosier picture either. This disappointing outcome is attributed to a string of issues discussed during the Q3 IR call, some of which were not sufficiently addressed by Musk and his team.
Signs of Hope amid Unsettling Performance
Despite the gloomy atmosphere surrounding the call, Musk expressed empathy for lower-middle-class individuals who may desire a Tesla car but are unable to afford one. He stressed the importance of making Tesla products more affordable and hinted at his empathy towards potential customers struggling with debt. He discouraged rampant speculation on the timing of the introduction of the next-gen product by refusing to divulge any relevant information at this juncture.
The Tesla Investor Day held in May 2023 sparked speculation about the release of a low-cost Tesla Model C, which could have enhanced the company’s appeal and reinforced its position as a leader in zero-emissions automobiles. However, the company seems to be more interested in other factors such as the Cybertruck, Full Self Driving (FSD), advertising, robotaxis, radar, and price elasticity.
A Deep Dive into Tesla’s Current Focus
Musk adopted a cautious approach regarding the Cybertruck, stating that it could take up to 18 months to make a significant positive cash flow contribution. For Full Self Driving (FSD), Musk highlighted how Tesla vehicles have collectively driven over half a billion miles under the FSD beta program. In the sphere of advertising, Musk highlighted the company’s muted stance, stressing the need to make its products affordable before marketing them extensively. Musk also expressed his excitement about the progress in the development of Tesla’s self-driving software. As for Tesla’s own radar, Musk stated that it is currently being tested on Model S and X. Finally, Musk talked about price elasticity, emphasizing the dire need for affordability in order to attract more consumers.
It is noteworthy that Tesla is not the only automaker grappling with a sluggish EV market. Major competitors like General Motors, Ford, and Volkswagen have all announced a slowdown in their EV production plans.
What Lies Ahead for Tesla?
As Tesla aligns its production capacity with market demand, its strategy for the near future seems to involve boosting efficiency on existing production lines instead of expansion. As Musk hinted, the next quarter will be a decisive one in determining Tesla’s market hold and its allure among stockholders. Despite hardships, Musk’s persistent vision might just steer the company towards resurgence, especially if the economy proves to be stronger than anticipated.
