Tesla buys the record sales of its electric cars with price cuts – and that has an impact on profit development. Company boss Elon Musk was nevertheless ready to further price reductions if the economy should deteriorate. At the same time, Musk made some full-bodied promises: He believes that the advanced version of Tesla’s Autopilot assistance system will be able to control a vehicle better than a human by the end of the year.
In addition, according to Musk, the most modern version of the autopilot technology could move into vehicles of another brand for the first time. Tesla is in talks with a major manufacturer, the tech billionaire said after presenting current quarterly figures. He did not name the interested company.
Tesla’s business in the past quarter was again characterized by records. Deliveries shot up by more than 80 percent year-on-year to a good 466,000 vehicles, partly due to the expansion of production in Grünheide near Berlin.
Is Musk starting a price war?
Sales grew more slowly by 47 percent to 24.9 billion dollars (22.2 billion euros). And earnings growth was even more subdued, up 20 percent to $2.7 billion. With the quarterly figures, however, Tesla exceeded the expectations of the analysts, who had expected even more pressure from the price reductions.
Musk always emphasizes that he also accepts a drop in profitability for growth. Among other things, he argues that in times of high interest rates you have to sell cars cheaper so that they remain affordable. At the same time, Musk sees Tesla prepared to reduce production costs through greater efficiency.
A big question in the industry is whether Musk will start a price war in which other manufacturers have to compete at a discount for customers for their electric models. Competitor Ford lowered the price of its F-150 Lightning electric pickup by $10,000 this week. Pickups are the most popular vehicle class in the USA and Tesla wants to enter the market with its “Cybertruck”.
Operating margin — the ratio of sales to operating income — declined for the third straight quarter, to 9.6 percent. According to industry expert Ferdinand Dudenhöffer from CAR-Center Automotive Research, the Musk offers “a kind of war chest to carry out further price reductions”.
Also noticeable was a significant increase in research and development costs to $943 million from $771 million in the previous three months. The group is currently preparing the “Cybertruck” series production. A few days ago the construction of the first pickup in Texas was announced. On Wednesday, Tesla clarified that it was still a pre-version of the vehicle. Musk did not answer the question about the planned “Cybertruck” price.
Musk makes big promises
In the conference call with investors and analysts, Musk announced, among other things, that a planned Tesla robot taxi will have a “revolutionary design with a revolutionary construction”. As a result, it will be possible to build more vehicles per hour than any manufacturer before.
Once again he promised that Teslas that had already been sold would be greatly upgraded with the activation of autonomous driving functions. Musk is referring to the latest version of Autopilot, which Tesla calls “Full Self-Driving”. Drivers in the US can currently test them.
Contrary to what the name suggests, FSD does not make the vehicle an autonomous car according to the common industry definition, but continues to be considered an assistance system. Videos from FSD testers showed some serious software errors that had to be corrected by the human driver. Musk points to rapid improvements through the evaluation of large amounts of data. Unlike other developers, Tesla relies on cameras on the vehicles and does without more expensive laser radars that scan the environment.
Musk acknowledged that he had often made overly optimistic predictions about the capabilities of the FSD software. However, even now he said: “I think that by the end of the year we will be better than one human”. That doesn’t mean that the software will also be approved by the regulators, he restricted in the next breath. And it’s only about the US market, because you have to focus on one market first.
Tesla shares fell a good four percent in premarket trading – while they were still slightly up before the conference call.
