Produced | Tiger Sniff Car Group
Author | Wang Xiaoyu
Edit | Thoughtful
Head Map | Visual China
“Tesla (NASDAQ: ) is likely to be worth more than Apple (NASDAQ: ) and Saudi Aramco combined. This is Tesla CEO Elon Musk, on the Q3 2022 earnings call The boasted seaport. He also expects Tesla to be worth twice that of Saudi Aramco.
For reference, Apple’s current market cap is $2.3 trillion, Saudi Aramco is $2 trillion, and Tesla is worth about $700 billion. Then the market value equivalent to Tesla will reach a high of $4 trillion in the future. However, after saying this, Musk added: “I know it’s difficult, and it requires us to work very hard, demand creative new products, manage expansion, and good luck.”
The new products Musk said are likely to be “cheap Teslas.”
Half-price Model 3 on the way
On October 20, Tesla released its financial results for the third quarter of 2022. The financial report data shows that Tesla has been profitable for 13 consecutive quarters, with free cash flow as high as 3.3 billion US dollars. In the subsequent earnings call, Musk responded to questions about new models, FSD fully autonomous driving, Semi semi-trailer truck deliveries, and more.
Among them, nothing is more concerned than “cheap models”. In the Q&A of the financial report voted by shareholders, there is such a question: “From Tesla’s first Model S/X platform to the second Model 3/Y platform, COGS (cost of main business) 50% reduction. When will Tesla release the third platform, what level of COGS reduction?”
Musk’s answer is that there is no exact date yet, but the main focus of Tesla’s development team is to develop the next generation of models. He’s pretty sure that “the next model will be smaller and will produce more than all of Tesla’s products combined.” As for cost, Musk wants another 50 percent cut. In other words, compared to the current Model 3/Y, the cost is cut in half.
As we all know, Tesla’s global model price changes follow the principle of “pricing at cost”. The lower the cost, the lower the selling price, and vice versa. At present, the pre-subsidy price of the domestic Tesla Model 3 entry-level model is 290,988 yuan. If the cost is halved, the price is likely to be halved. This means that buying a Tesla for 150,000 yuan is just around the corner.
Of course, the “half-price Tesla” won’t come out anytime soon, but the figure of a 50% cost reduction is not groundless. You know, Tesla’s cost reduction has always been driven by scale effects. During the earnings call, Musk said that we believe Tesla’s revenue and production will grow at a 50% compound annual growth rate.
According to the latest financial report data, in the third quarter of 2022, Tesla produced more than 365,000 vehicles globally, a year-on-year increase of 54%; delivered more than 343,000 vehicles, a year-on-year increase of 42%. The total revenue reached 21.5 billion US dollars, an increase of 56%. In terms of revenue and output, the current growth rate has exceeded 50%.
Higher revenue growth also drove the overall revenue level up. Tesla’s third-quarter GAAP operating profit was $3.7 billion, with an operating margin of 17.2%; third-quarter GAAP net profit was $3.3 billion, and non-GAAP net profit (excluding share-based payments) was $3.7 billion; GAAP automotive gross margin in the third quarter was 27.9%.
In the growth trend, Tesla still faces challenges. For example, the gross profit margin of Tesla Motors has been below 30% for two consecutive quarters. In addition, some investors expressed concern about Tesla’s demand side, especially in the Chinese market, where Tesla’s sales growth of electric vehicles in China in September was the slowest in nearly five months. In the face of various objective factors, Musk still expressed confidence in Tesla’s market demand – we have strong demand in the fourth quarter. “Whatever happens or not, we’re not going to cut production significantly.”
Delivery still a big issue
The current headache for Tesla is indeed not demand, but delivery.
At present, Tesla’s five-seat work has entered a state of “full fire”. Among them, the Shanghai Tesla Gigafactory has the largest production capacity, exceeding the annual production capacity of 750,000 vehicles, mainly producing Model 3/Y; followed by the California factory, with an annual output of 550,000 Model 3/Y and 100,000 Model S/ X; The Texas Gigafactory has been in operation for less than half a year, but has already produced 10,000 Model Ys; the Berlin factory, which has just started, is relatively “lag”. More than 2,000 Model Ys with 2170 batteries were produced in a single week, and they are still in the ramp-up stage.
The Nevada plant responsible for the production of the electric truck, the Semi, is currently in the early stages of production, with the first deliveries scheduled to start in December this year. On the earnings call, Musk made it clear that on December 1, he would personally deliver the Tesla electric truck Semi to PepsiCo. Compared to the more confident words in the past, Musk has been extra cautious when it comes to the delivery of the new model Semi. He also said that Tesla “tentatively plans” to deliver 50,000 semi-electric trucks in the North American market by 2024.
From the current point of view, Tesla’s vehicle delivery is indeed a bit difficult.
Tesla CFO Kirkhorn said on the conference call that in the third quarter, one-third of deliveries were concentrated in the last two weeks, and the annual growth rate of deliveries this year is expected to be less than 50%. And Musk said in response to the blockage of new car deliveries in the third quarter: “There are not enough ships, not enough trains, not enough trucks.”
Tesla said that their high-volume deliveries in the last few weeks of each quarter have led to increased transportation costs and logistical instability. As a result, companies began transitioning to a smoother delivery cadence. Based on this, the company will have a large number of vehicles still in transit at the end of the quarter. “We expect smoother out-of-factory logistics during the quarter, which will lead to lower transportation costs per vehicle.”
Secondly, the delivery of FSD fully autonomous driving functions is also “slowly advancing”.
During the earnings call, Musk reiterated that Tesla is aiming for a broad rollout of the beta FSD system by the end of the year. “This quarter, we expect the FSD system to be launched on a large scale in the North American market.” He also said that the large-scale rollout will take place in about a month, and anyone who purchases the FSD package will use the feature immediately. .
Although it is not yet sure whether FSD will be pushed to users in China synchronously, Tesla’s Autopilot automatic assisted driving introduction page on its official website in China has replaced the description of Tesla Vision – the vision processing system can detect nearby vehicles to reduce collision risk and assisted parking.
Previously, Tesla’s official website has announced that starting in early October 2022, all Model 3 and Model Y in North America, Europe and other regions will no longer use ultrasonic sensors, but rely entirely on Tesla Vision to provide Autopilot, Enhanced autopilot, FSD capabilities and active safety features.
In addition, the mass production of 4680 batteries is also slowly advancing. Tesla responded on the earnings call. Currently, the 4680 battery is being deployed in the Austin, Texas factory. It hopes to produce more than 1,000 4680 batteries per week. It is currently working hard to increase production capacity in North America, but there are some insurmountable difficulties in production and execution. And challenges, there are serious problems with logistics.
When talking about battery raw materials, Musk was asked “whether to consider mining.” His answer: “Whatever the limiting factor, we will pay attention. If we have to mine to get raw materials for electric vehicles, then we will mine.”
On Earth, it looks like there’s nothing stopping Musk except to slow his progress.