Shares of Tesla (TSLA) declined more than 6% on the heels of the company’s investor day event, which was held last Wednesday at its Gigafactory in Austin, Texas. Among other things, the luxury electric vehicle maker outlined a strong focus on sustainability and the company's future trajectory.
Dubbed the company’s “Master Plan Part 3,” the presentation took two parts. Tesla CEO Elon Musk kicked off the event talking about the "clear path" to a fully sustainable Earth, while outlining the company’s mission statement. “There is a clear path to a sustainable-energy Earth. It doesn’t require destroying natural habitats,” Musk said. “It doesn’t require us to be austere and stop using electricity and be in the cold or anything.”
Musk added, “In fact, you could support a civilization much bigger than Earth, much more than the 8 billion humans could actually be supported sustainably on Earth.” The other aspect of the presentation provided a glimpse of Tesla’s vision for lowering costs and, thus, growing its margins. In that vein, a new manufacturing platform for building next-gen vehicles more efficiently. Not only is the new platform expected to reduce costs, it would have a much lower manufacturing footprint at scale.
The company also talked about ways to address various design and engineering challenges. Among the many things Musk highlighted was the level of waste which currently exists within the energy economy. Musk talked about the current population of the world and how the expansion of energy storage, and scaling renewable power could power the world’s population.
The master plan also included ways to eliminate fossil fuels, powering up the existing grid with renewables, and for consumers and businesses to switch to all-electric vehicles. Part of the company's long-term plan also included electric planes and boats. The company also disclosed that it had broken ground on a lithium refinery plant located in in Corpus Christi, Texas which will be ready for production potentially by the end of this year.
The company has previously set an aggressive goal to to produce 20 million vehicles annually by the end of 2030. Currently, Tesla’s production capacity runs at an annual rate of about 2 million vehicles per year. In order to achieve 20 million vehicles, the company would need additional production capacity. As such, the company also announced that a new Gigafactory will be built in Monterrey, Mexico. The company also talked about the future for FSD, a robotaxi network, and its Supercharger infrastructure.
All in all, some analysts argued that the presentation had a lot of talking points, review of prior achievements and vision, but was short on specific details of just exactly how Tesla was going to achieve its goals. The reaction in the stock suggests investors were disappointed by the lack of financial clarity and details in the presentation. For now, while there are still some questions about Tesla’s first half 2023 performance, namely gross margin improvement, the stock remains attractive from a risk-versus-reward perspective.
Tesla is set to report first quarter earnings some time in April. Wall Street expects the company to earn 86 cents per share on revenue of $23.59 billion. As strong as these year-over-year comparisons might appear, the company’s increased focus on its growth strategy, namely production and profit margins, will be a key driver for the stock in 2023.
During the Q&A session of the presentation, Musk was asked about the demand for Tesla vehicles and impacts of recent price cuts. Musk responded, “Demand is a function of affordability, not desire.” He said, “Even small changes in the price have a big effect on demand.” In other words, Tesla is in where it wants to be and is in full control of what it can control.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
In This Story
TSLAOther Topics
Investing Technology
Richard Saintvilus
After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.
Read Richard's Bio