Tesla CEO Elon Musk sounds pessimistic note about economy on earnings call

• Tesla reported adjusted earnings of 66 cents per share versus 73 cents expected.
• Total operating margin came in at 7.6%, down significantly from the year-ago quarter's figure of 17.2%.
• During the company's earnings call, CEO Elon Musk expressed caution about the state of the global economy and said the company's focused on making its cars more affordable.

Tesla reported third-quarter results after the bell Wednesday.

The company's shares rose as much as 2.4% in extended trading after the report crossed, but then sank more than 4% after CEO Elon Musk cautioned that the Cybertruck would not deliver significant positive cashflow for 12 to 18 months after production begins, and emphasized that the company is focused on making its cars more affordable amid a high-interest rate environment.

Here's what the company reported compared with what Wall Street was expecting, based on a survey of analysts by LSEG, formerly known as Refinitiv:

• Earnings: 66 cents per share adjusted vs 73 cents per share expected
• Revenue: $23.35 billion vs $24.1 billion expected

It was the first time Tesla has missed on both earnings and revenue since its second-quarter 2019 report in July 2019.

Tesla executives said on an earnings call that they are "laying the groundwork to begin construction," on a new factory planned in Mexico. But Musk said before Tesla goes "full-tilt" on the Mexico factory, the company is working to bring down the price of its cars.

He said: "I'm worried about the high interest rate environment we're in," and said people buying cars are focused on how much their monthly payments will be. "If interest rates remain high or if they go even higher, it's that much harder for people to buy the car."

Musk later noted: "I just can't emphasize enough how important cost is. …. We have to make our products more affordable so people can buy it." He said that bringing the cost of Tesla's cars down was akin to a "'Game of Thrones,' but pennies."

The company announced on X (Twitter), now owned by Musk, that "Cybertruck production remains on track for later this year, with first deliveries scheduled for November 30th at Giga Texas." Separately, the Cybertruck account on X said there'd be a "delivery event" on that date. The shareholder deck said the Cybertruck is in "pilot production" with the Texas factory capable of making 125,000 per year.

On the earnings call, Musk tempered financial expectations for the vehicle, saying, "It is going to require immense work to reach volume production and be cashflow positive at a price that people can afford," with the Cybertruck. He also emphasized, "I just want to temper expectations for Cybertruck. It's a great product, but financially, it will take a year to 18 months before it is a significant positive cash flow contributor."

The company still hasn't announced exact specs or pricing for the Cybertruck.

Musk also noted that many shareholders want Tesla to advertise, and Tesla is currently advertising. (The company is at least paying for cost-per-click ads online, which have been reviewed by CNBC.) But if Tesla ads provide people with information about great cars that they cannot afford, that "doesn't really help," Musk said.

During the quarter, the company reported $19.63 billion in automotive revenue and $1.56 billion in revenue from its energy generation and storage business. Within automotive revenue, the portion from regulatory credits grew in the third quarter to hit $554 million, up from $282 million the previous quarter and $286 million in the third quarter last year.

During the same period last year, Tesla reported revenue of $21.45 billion.

Net income for the quarter was $1.85 billion, or 53 cents per share, down from $3.29 billion, or 95 cents a share, a year earlier. Total gross profit declined 22% year over year. Total operating margin came in at 7.6%, down significantly from the year-ago quarter's figure of 17.2%.

The company wrote, in a shareholder presentation: "Our cost of goods sold per vehicle decreased to ~$37,500 in Q3. While production cost at our new factories remained higher than our established factories, we have implemented necessary upgrades in Q3 to enable further unit cost reductions."

Research and development expenses came in at $1.16 billion, up from the year-ago quarter's figure of $733 million. The company noted it had "more than doubled the size of our AI training compute to accommodate for our growing dataset as well as our Optimus robot project." 

Musk previously revealed that Tesla is rewriting its driver assistance systems, marketed as FSD Beta in the U.S., using an end-to-end machine learning approach.

When pressed for updates on when Tesla may finally deliver a robotaxi-ready vehicle, or software that can make its cars safe to drive without a human manning the wheel, Musk did not offer a specific timeline. He said, "All of the cars we are making and have made for awhile we believe are capable of full autonomy."

In its energy business, Tesla deployed 3,653 MWh in energy storage during the quarter representing a 90% increase versus the same period last year, but its solar installations dropped by 48% year over year to 49 MW.

The Q3 2023 earnings call was Tesla's first since its previous CFO, Zachary Kirkhorn, announced he was stepping aside. Chief Accounting Officer Vaibhav Taneja now holds both roles concurrently at Musk's electric car company.

Taneja, like Musk, emphasized that Tesla would remain "unflagging" in its "pursuit of additional cost downs for 2024," where both engineering and factory operations were concerned.

Toward the end of the call, Musk apologized for sounding "paranoid," about the economy which he said may be rocked by ongoing wars around the world (alluding to the conflicts underway between Israel and Hamas, and Russia and Ukraine). Likening Tesla to a world-class ship, he said, "Even a great ship in a storm has challenges."

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