Q4 2023 Summary
Published Jan 10, 2025, 5:10 PM UTC- Tesla's innovative cost reduction strategies are leading to significant decreases in cost of goods sold (COGS), with COGS per car decreasing by over 2% sequentially on average over the last 5-6 quarters, equating to a 10% annual reduction, an achievement unheard of in the auto industry.
- Tesla is developing revolutionary manufacturing technology for its next-generation low-cost vehicle, which is expected to start production towards the end of 2025. This new manufacturing system will be far more advanced than any other automotive manufacturing system in the world, significantly improving Tesla's production capabilities and cost position.
- Tesla's Optimus humanoid robot project has the potential to far exceed the value of everything else at Tesla combined. The advanced AI technologies developed for Tesla vehicles translate well to humanoid robots, and Tesla is arguably already the biggest robot maker in the world.
- Tesla is approaching the limits of cost reductions on their current platforms, which may hinder future margin improvements. Vaibhav Taneja stated, "with our current platform, we are getting to a place wherein there is -- there are limitations."
- Cost increases due to hourly wage hikes and diminishing benefits from raw material cost reductions may negatively impact margins. Analysts noted that raw material cost benefits are almost played out, and wage increases will add to costs.
- Affordability remains a significant barrier for potential customers, and if interest rates don't come down quickly, margins won't be that good, according to Elon Musk. Many people want to buy a Tesla but "simply cannot afford it," impacting demand.
-
Cost Reduction Pace
Q: Can you sustain the current cost reduction pace?
A: Tesla is constantly seeking ways to reduce costs further. However, they caution that the previous pace of cost reductions may not fully continue due to limitations with the current platform. They do not believe they will maintain the same pace seen over the past few years. -
2024 Cost Outlook
Q: Can costs go below $36,000 per car in 2024?
A: Tesla is aware of upcoming cost increases due to wage increases but sees more opportunities to reduce costs further. Elon Musk noted that even a 1% cost improvement equals $1 billion. They believe there is definitely more opportunity to bring down costs, though no specific target was provided. -
Tax Rate Increase
Q: Will tax rates jump to S&P 500 levels next year?
A: The tax rate will immediately increase due to an accounting change, but there's no impact on cash taxes. Previously, certain jurisdictions didn't require accruing book taxes, but now deferred tax assets are recognized, raising the tax rate. -
Chinese Competition
Q: How will Chinese EV makers affect western markets?
A: Elon Musk noted Chinese car companies are extremely competitive and could "demolish most other car companies in the world" if no trade barriers are established. Tesla does not see an opportunity to partner with them, except possibly on Supercharging or licensing Full Self-Driving. -
Next-Gen Platform Timing
Q: What are the gating factors for the next-gen platform?
A: Tesla is validating new manufacturing technologies for the next-gen vehicle, designing specialized machines that have never existed before. Cybertruck is not a gating factor for the next-gen platform. -
Dojo and AI Progress
Q: Where does Dojo stand in improving FSD?
A: Dojo is operational and training jobs are being run, but it's considered a high-risk, high-reward project. Tesla is pursuing both NVIDIA GPUs and Dojo for AI training, with Dojo having potential but not a sure thing. -
Addressable Market
Q: What's the size of your addressable market with current models?
A: Tesla does not have a firm estimate, as it's hard to say exactly. EVs still make up a small market share, and Tesla aims to capture as much of the 100 million per year vehicle market as possible. They currently account for about 2% of that market, leaving 98% more to capture. -
AI Day Plans
Q: Will there be a Tesla AI Day this year?
A: They might hold an update later this year, but must be cautious as competitors closely analyze their presentations. The main goal of AI Days is recruiting and changing Tesla's perception to an AI robotics company. -
48-Volt Architecture
Q: Is Cybertruck a proving ground for new tech like 48-volt systems?
A: 48-volt architecture is an evolution in vehicle design but is not gating the next-gen platform. Tesla hopes the industry adopts 48-volt systems, which reduce copper usage.