Musk full of caveats about next wave of Tesla growth
Firm's projections light on detail as Musk hedges his bets on next-gen EV timeline
While appearing to dampen expectations for near-term growth, Tesla management was effusive about the potential of its next growth period, which is set to be led by a raft of new or developing products and services.
"Tesla is currently between two major growth waves. We are focused on making sure that our next growth wave, driven by next-gen vehicle, energy storage, full self-driving and other projects, is executed as well as possible," Musk says.
But Musk and his team are loath to say precisely when this second wave will arrive to buoy the company's valuation. It was a familiar tone to Q3 earnings, after Musk repeatedly dampened expectations about the Cybertruck and CFO Vaibhav Taneja first flagged the growth trough.
One of the areas in which Musk was noticeably non-committal was ramp-up of the highly anticipated next-gen affordable Tesla, which he has publicly teased and which the CEO says will reach previously unseen levels of affordability due to manufacturing breakthroughs.
"In 2024, our volume growth will be lower, as we have said, because we are trying to focus the team on the launch of the next generation vehicle," he says, noting that Tesla's current schedule shows that it will start production towards the end of 2025. "So sometime in the second half,” Musk confirms.
Despite saying that Tesla is "very far along on our next-generation low-class vehicle,” he caveats this by urging that “this should be taken with a grain of salt, since I am often optimistic.”
The large amount of new technology in the vehicle will make for a challenging production ramp, according to Musk.
"We will be sleeping on the line practically. In fact, not practically. We will be," he says.
The growth headwinds expected in 2024 are due in part to Tesla not being able to continue reducing costs at the rate it had across 2023, according to Taneja.
"The team is constantly going and checking where can we reduce the cost further. Do I believe that we will have the same pace which you have seen over the past few years? Probably not, because remember, we were coming out of a period wherein commodity prices [had been] rising, so then we did see benefits coming from that," he says.
"I would want to caution — do not project the previous cost reduction at the same pace completely in the future, because with our current platform, we are getting to a place wherein there are limitations," the CFO continues.
And this is despite Tesla "looking at every penny" in negotiating new deals with suppliers, according to Karn Budhiraj, vice-president of supply chain, who notes that the company has already reduced its inbound logistics costs by 22pc.
Musk also continues to insist, despite the importance of the 'Model 2', that the firm's future growth will "change the perception" of Tesla from a car company to that of an AI robotics company.
Tesla's full self-driving (FSD) system, which Musk has previously said will drive a fivefold value increase for the company, recently saw its new version 12 released, and the management is insistent that FSD will play a central role in driving Tesla's next growth cycle.
Musk, however, notes the nascence of the system, saying that it "is currently just with employees and a few customers".
Tesla will aim to roll it out to all customers in the US who request FSD in the weeks to come, according to Musk.
"That is over 400,000 vehicles in North America," he says, although no guidance was given as to how this translates into revenue and margins.
Outside of this, investors seeking details about the timing and risks surrounding Tesla's next strategy for growth may have left the earnings call somewhat short-changed. Unusually, the company also did not provide updated production guidance, which may only elicit more caution from analysts about Tesla's short-term growth prospects.