Author: Chang Yan

Making money seems to have little to do with sexiness.

After spending 7 years analyzing Tesla’s quarterly financial reports, I noticeably feel that the excitement of discovering sexy product information and technical points through each financial report is gradually disappearing; and instead, what remains are various numbers cycling through “growth – rapid growth”.

This may be the reward and cost of a technology start-up evolving into a business giant. The rapid progress of financial indicators brings substantial cash income, but the industry’s sense of curiosity and imagination for Tesla have declined due to a single-scale expansion. Although the decline in stock prices of American new energy vehicle companies is the result of various political and economic factors, the continuous 1/3 decrease in stock prices has made Musk realize that he needs to lead everyone with more ambition and expectations.

“I have never seen Musk cheer for Tesla at a financial conference like this,” tweeted Sawyer Merritt, a core observer of Tesla.

Giving hope is the underlying theme of this financial report conference.

Never worry about demand, and endless expansion

Business practices for thousands of years have told us that there is often a mutually inhibitory relationship between price and demand. When the price keeps rising, the corresponding demand will most likely decrease.

Unfortunately, electric cars are on an uncompromising road to rising prices. Therefore, judging from the questions that analysts asked in the financial report conference, what people are most concerned about is demand. Specifically, they are asking whether Tesla is pessimistic about market demand, and whether it is considering using price reductions to boost demand.

Musk’s answer is: there is no need.

In Musk’s view, not only are “all factories running at full speed” currently, but also “there is a good estimate of demand for the fourth quarter and every car we produce within our foreseeable range can be sold.”

“There is no sign that we will have to cut production, and we’re not worried about demand.”

“We will not reduce our production in any way, no matter if there is an economic recession or not.”

“50% is Musk’s most confident expectation for the future.”

“The production volume is expected to achieve a 50% growth this year. As the number of vehicles in transit increases, the delivery volume is expected to be slightly lower than the 50% growth.”

“I believe Tesla’s revenue and production volume will grow at a compound annual growth rate of 50%.”

“Even in a harsh recession year in 2023, we will have significant cash income.”

In the short term, Musk’s confidence may come from the large number of orders held by Tesla, but in the long term, it is also closely related to the industry environment in which Tesla operates.

On the one hand, the world is accelerating its transition to electric vehicles. As a leading company, Tesla can naturally receive excess returns in the industry expansion. On the other hand, Tesla is also carrying out business expansion and investment in a composite manner, and already has a healthy cash flow income, which widens the room for Tesla to turn around.

“It looks like we’re going to have an epic fourth quarter.”

Tesla’s New Trinity

Previously, software and batteries seemed more like components on Tesla cars, only as parts that can be referenced for overall vehicle performance.

Nowadays, you can already see from the financial report the huge potential of Tesla’s software and energy businesses, even as a core business that can be on par with, or even surpass, the automotive hardware.

But let’s start with the cars first.

People’s concerns about Tesla are also related to the fact that there have been no new products for a long time.# Tesla’s Latest Financial Report

During a conference call for the financial report, an analyst asked Elon Musk whether Tesla had any plans to improve the interior and performance of its current models. Musk’s brief and to-the-point response was “NO.” Fortunately, there was still much to discuss regarding new vehicles.

Perhaps what was most exciting in the Q3 financial report was the news that the Cybertruck and Semi trucks have finally left the developmental stage. The Cybertruck has entered the tooling preparation stage, and the Semi truck has even started pre-production.

Earlier this year, Tesla confirmed that the Semi truck would begin deliveries in December. During the earnings call, Musk revealed new data on the Semi’s range: it will be capable of traveling 800 kilometers while hauling heavy loads.

Contrary to expectations, the Semi truck will not be using the 4680 battery cells. Musk stated that he hoped to produce 50,000 Semi trucks in North America by 2024.

“The Cybertruck is still on track for production in the middle of next year. The delay is largely due to supply chain issues and the pandemic.”

However, the most thrilling news was Musk’s statement that “we have the most exciting product lineup on Earth – some of which you’ve already seen, and some of which you haven’t.”

Musk confirmed that their third-generation automotive platform is currently in development. This new car’s cost will be half that of the Model 3/Y, it will be smaller in size, and sales are projected to surpass the combined production of all other Tesla vehicles. Musk’s expectations for this new platform are even higher than for the Model Y, which he had previously said would become the world’s best-selling car.

“On this platform, we should see the birth of the legendary Model 2, as well as Tesla’s Robotaxi.”The eagerly awaited FSD beta test version is expected to be widely released this quarter, according to Elon Musk. He promised that anyone who bought FSD would have access to it within “the next month.”

• I don’t know if this includes those of us in China.

Even on the day of the financial report, Musk commuted to work on FSD, traveling from a friend’s house to Giga Texas without ever touching the controls.

Musk said that FSD is not yet approved by regulatory agencies, but next year true autonomous driving may become a reality. At that time, Tesla will be able to show regulators that cars can be much safer than humans.

“We’ve finally made rapid progress in 4680 battery production, with output rapidly increasing,” and “we hope to increase our 4680 battery production capacity to over 1,000 packs per week in Q4,” so next year “4680 battery production will not be a limiting factor for Cybertruck production.”

The fluctuations in battery prices are still a core concern for Musk. Although commodity prices have dropped significantly, lithium for battery grades is still insanely expensive in electric vehicles. Deflation has exceeded inflation, with the third quarter seeing the highest increase in commodity prices in the past two years, but there has been a significant reduction in transportation costs.

“Tesla is committed to achieving 1,000 GWh of battery production in the United States”, and even “if necessary, we will enter the mining industry” because “fixed energy storage businesses can grow 150% to 200% annually, faster than cars.”

Beating Apple?

Apple has long been the world’s most valuable company.

Of course, this is because its products are excellent, and because it has deeply changed or even bound people’s lives.

No other company has been able to surpass Apple in these two aspects.But Musk suddenly saw the hope of defeating Apple this quarter.

“We could have a market value far exceeding Apple’s in the future, possibly even higher than the value of Apple and Saudi Aramco combined (not including Tesla’s robots). But it’s not easy, it takes some luck. This is the first time I’ve seen this kind of potential.”

And Musk’s dream clearly goes beyond just Tesla, the legendary behemoth X is also beckoning to us:

“I do think about merging all companies into X Holdings, but I’m not sure under what circumstances it would occur, I’m excited about acquiring Twitter.”

So, are you excited about these things?

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This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.