Tesla publishes its financial results for 2023; profit margin shrinks

Revenues only grew by 3 percent year over year, disappointing the market.

See full article...

 

[real mikeb_60]

'bout all I can say is: Tesla finally looks like a car company. One that works (mostly), but a car company not a tech startup. I'm sure Elon will find a way to fix that.

 

[barich]

Genuine question: how much, if any, of BYD's success is ahem tied to Tesla starting to manufacture vehicles in China a couple years ago? Is it reasonable to assume Tesla bore some of the R&D costs that are now propelling BYD to prominence?

More like it's not actually that hard to produce an electric vehicle. Battery sourcing seems to be the biggest issue holding back volume production for non-Tesla OEMs, and BYD doesn't have this problem as it makes its own. It's also been making hybrids and PHEVs for a long time.

 

[Bongle]

Tesla’s stock price valuation is ahead of major tech companies like Microsoft, Google and Apple. I expect that eventually, its ordinary profits are not going to support Tesla’s extremely high market valuation.

Their market cap isn't higher than those other companies.

MS and AAPL are tied at nearly $3T value, and their profits are regular and large enough to actually support that. Tesla is at $0.65B, 65-70 times earnings. To match Apple and Microsoft in terms of price/earnings they'd need to have their stock about halve.

 

[Torao]

Good thing there are other OEMs out there that aren't Chinese that offer EVs right now... even though your sinophobia is irrational.

But hey... if you feel like you're able to hold your nose and support an OEM that is helmed by an ever-increasingly irrational CEO, who flirts with racism, white supremacy, transphobia and other nonsensical conspiracy theories... don't complain when people call you out over that.

Flirts with racism, white supremacy, transphobia and other nonsense conspiracy theories? I'd hate to see what you'd call getting in bed with those things if Elon is only flirting with them.

 

[OrangeCream]

I have various beefs with Tesla and Musk, but this is a serious indictment of the stock market. It's no longer good enough to be competent and consistent. A company needs to constantly outsell itself even when there's no one left to sell to, and constantly increasing margins even when consumers can't afford to spend more. This mentality profits organizations that might not normally be successful, because investors rush to be the first to own shares of the next hot thing. But it also harms organizations that are otherwise OK, because investors pooh-pooh a business for no longer being the next hot thing.

That's false. Tesla sold itself on high (tech company like) margins; the stock was the product and the shareholders bought on that premise.

With that premise now being false, shareholders are selling their shares.
https://techcrunch.com/2023/07/21/tesla-earnings-stock-price-down/Tesla’s stock is worth more than that of Ford, General Motors, Toyota, Volkswagen and Stellantis combined. Even though Tesla is an automaker, it’s valued as more of a tech company, with a share price that puts it in the camp of companies like Apple, Nvidia and Microsoft.

But that share price took a hit this week after the company reported declining auto gross margins in the second quarter. Tesla’s stock closed $291.26 Wednesday after reporting earnings but has since fallen to $261.56 at the time of this writing.

 

[quamquam quid loquor]

Have QA outcomes for Tesla production been shown to be superior in China?
If so, I wonder why that is, seeing as other NA manufacturers don't have issues to the degree that Tesla is having.

Yes, significantly higher build quality and consistency.

My conjecture is other manufacturers have more mature processes and better quality US workers. Chinese Tesla workers are extremely high quality and can compensate for poor processes.

 

[thebonafortuna]

More like it's not actually that hard to produce an electric vehicle. Battery sourcing seems to be the biggest issue holding back volume production for non-Tesla OEMs, and BYD doesn't have this problem as it makes its own. It's also been making hybrids and PHEVs for a long time.

Interesting. I didn't realize BYD has been around for more than a few years. I'm a car guy, but literally had never heard of BYD until they sprung into the auto journal sphere recently-and-fast. Engineering automobiles is difficult, so not starting from zero helps explain what otherwise felt like a very rushed entrance.

 

[Flipside79]

The competition is now outputting meaningful quantities of vehicles, and they are starting to compete on price as consumers are swimming in inflation, a contracting job market, and general uncertainty. Not a good situation for a car manufacturer valued like a tech company.

 

[barich]

Yes, significantly higher build quality and consistency.

My conjecture is other manufacturers have more mature processes and better quality US workers. Chinese Tesla workers are extremely high quality and can compensate for poor processes.

Perhaps Elon has more direct control over the culture and manufacturing processes at the Fremont plant?

 

[jandrese]

Maybe they need a new CEO…

Elon recently had a hissy fit where he issued an ultimatum he needs way more stock or he won’t work as hard.

 

[Gibborim]

$25 billion is a disappointment?

Yes, absolutely. To justify their obscene market cap, they need to maintain high margins and be visibly growing quickly. If Tesla plateaus for too long, their stock is going to lose 90% of its value.

 

[dustradio]

Now that the supercharger network is open to any EV, the most compelling reason to buy a Tesla is gone, especially with Tesla's well documented QC issues.

 

[aapis]

Well it’s a good start. Looking forward to future losses!

 

[Dr Gitlin]

Their market cap isn't higher than those other companies.

MS and AAPL are tied at nearly $3T value, and their profits are regular and large enough to actually support that. Tesla is at $0.65B, 65-70 times earnings. To match Apple and Microsoft in terms of price/earnings they'd need to have their stock about halve.

And even that is overvalued since Tesla is an automaker not a tech company. I have no illusions that will happen, but $40/share seems where it ought to be priced, not $210.

 

[AmanoJyaku]

That's false. Tesla sold itself on high (tech company like) margins; the stock was the product and the shareholders bought on that premise.

With that premise now being false, shareholders are selling their shares.
https://techcrunch.com/2023/07/21/tesla-earnings-stock-price-down/Tesla’s stock is worth more than that of Ford, General Motors, Toyota, Volkswagen and Stellantis combined. Even though Tesla is an automaker, it’s valued as more of a tech company, with a share price that puts it in the camp of companies like Apple, Nvidia and Microsoft.

But that share price took a hit this week after the company reported declining auto gross margins in the second quarter. Tesla’s stock closed $291.26 Wednesday after reporting earnings but has since fallen to $261.56 at the time of this writing.

What's false? Ford, General Motors, Toyota, Volkswagen and Stellantis, etc... are the competent, consistent manufacturers being undervalued. Tesla was the next hot thing that was overvalued, but investors flocked to it and kept it afloat.

Was the next hot thing. Now that it's earnings are starting to look like the old guys' (minus the product competency and consistency), investors are turning their backs.

 

[Pecisk]

I agree that Tesla has a future, but it is not a future built on high margins, and that is whole point. Tech wise hardly few companies are capable to sustain that, and all cases those companies have cornered certain markets.
But problem is Tesla is not a mandatory sell for EV (like Windows is), and it is not exactly relatively cheap status symbol as iPhone (like Apple phones are). It is at price range where competition becomes serious.
Judging by numbers of units sold they haven't maxed out their potential market share just yet, but costs are piling up and despite volumes, those margins will be eroded by other factors.
Overall I am more interested in development of more sustainable and accessible electric transport, but I also check out EV offerings on regular basis and I just can't see myself even caring about Tesla.

 

[Pecisk]

What's false? Ford, General Motors, Toyota, Volkswagen and Stellantis, etc... are the competent, consistent manufacturers being undervalued. Tesla was the next hot thing that was overvalued, but investors flocked to it and kept it afloat.

Was the next hot thing. Now that it's earnings are starting to look like the old guys' (minus the product competency and consistency), investors are turning their backs.

Essentially this. I personally hate this kind of investor, but those dominate market these days, roaming around, looking for another big growth company.
Competition is here. Musk just spend too much time to fuck around, and now he is finding out.

 

[E.Murphy]

I wonder if Mr. Musk's latest tantrum demanding more stocks in exchange for more effort as CEO is really him attempting to distance himself from the company as it becomes apparent that is is not as revolutionary as originally sold. "of course Tesla socks are falling, I am only putting in minimum effort in as CEO. I could turn it around if only properly motivated."

 

[quamquam quid loquor]

And even that is overvalued since Tesla is an automaker not a tech company. I have no illusions that will happen, but $40/share seems where it ought to be priced, not $210.

Random observation. Dr Gitlin has to be the most prolific commenter amongst Ars writers. I see him on almost every car article.

 

[Sifaka]

Earlier on Wednesday, unnamed sources told Automotive News that a compact crossover Tesla could appear in 2025.

Based on the rollout of the Cybertruck it is hard to take this too seriously.

It feels like if there was a crossover that was actually going to be built in any sort of volume in 2025 we would already see it. Tesla is not nimble enough to rapidly prototype and produce an automobile. My guess is that at best there are a few preproduction crossovers in 2025.

 

[Bongle]

I wonder if Mr. Musk's latest tantrum demanding more stocks in exchange for more effort as CEO is really him attempting to distance himself from the company as it becomes apparent that is is not as revolutionary as originally sold. "of course Tesla socks are falling, I am only putting in minimum effort in as CEO. I could turn it around if only properly motivated."

I figured it was an attempt to pre-empt this selloff by guaranteeing that mentions of Tesla's also-ran AI and robotics efforts would be in the news this week.

 

[OrangeCream]

What's false? Ford, General Motors, Toyota, Volkswagen and Stellantis, etc... are the competent, consistent manufacturers being undervalued. Tesla was the next hot thing that was overvalued, but investors flocked to it and kept it afloat.

Was the next hot thing. Now that it's earnings are starting to look like the old guys' (minus the product competency and consistency), investors are turning their backs.

You said Tesla was competent and consistent. That was what I meant by “That’s false”. Had they been competent and consistent they wouldn’t be in a situation where their margins take a hit.

 

[AmanoJyaku]

You said Tesla was competent and consistent.

No, I did not. That was a general statement about investor attitudes. The post you quoted even specified who is competent and consistent.

 

[Bongle]

Cybertruck and Semi were behind schedule largely due to dumbass design decisions. Tesla hasn't had much trouble producing traditional cars in reasonable time frames. It's totally possible for a compact crossover in 2025 if one is already in the works.

Isn't the model Y close to a compact crossover already? If they're going to introduce a new model, why not attack a big market segment they're not already adjacent to, like "normal looking trucks" or "large and affordable SUVs" or "delivery vehicles"?

 

[ShadowGopher]

"Go fash, lose cash"

I believe that's how the saying goes?

 

[AmanoJyaku]

Isn't the model Y close to a compact crossover already? If they're going to introduce a new model, why not attack a big market segment they're not already adjacent to, like "normal looking trucks" or "large and affordable SUVs" or "delivery vehicles"?

The Model Y has room for a third row, so I assume it's considered too big for those looking for a true compact crossover.

Personally, I think building a smaller vehicle is the better choice than more trucks or SUVs. But I'm a city dweller, so I'm biased.

 

[OrangeCream]

Cybertruck and Semi were behind schedule largely due to dumbass design decisions. Tesla hasn't had much trouble producing traditional cars in reasonable time frames. It's totally possible for a compact crossover in 2025 if one is already in the works.

What are you talking about? Only one car in their entire history qualifies for that assertion, the Y; every other car they've made has undergone production hell.

If the compact crossover is based on the 3/Y platform I will trivially agree with you. If the compact crossover is a 100% designed from scratch car, I will emphatically disagree with you and I think we won't see their compact crossover until 2028.

 

[AmanoJyaku]

When you make a comment in an article about Tesla, and you make a vague statement about investor attitudes, I assume you are applying investor attitudes towards Tesla.

Your post made no reference to who is competent and consistent. I'll paste it here, and then insert Tesla as the assumed reference:
I have various beefs with Tesla and Musk, but this is a serious indictment of the stock market. It's no longer good enough [for Tesla] to be competent and consistent. A company Tesla needs to constantly outsell itself even when there's no one left to sell to, and constantly increasing margins even when consumers can't afford to spend more. This mentality profits organizations that might not normally be successful, because investors rush to be the first to own shares of the next hot thing. But it also harms organizations [like Tesla] that are otherwise OK, because investors pooh-pooh a business for no longer being the next hot thing.

Your very first sentence very specifically references Tesla and Musk, so it seems natural to assume the rest of the post is also referring to Tesla and Musk. If that weren't the case you could have trivially put the disclaimer, "This doesn't apply to Tesla, naturally, but this is a serious indictment of the stock market. ---> Everything else then becomes a nonsequitur because Tesla is neither competent nor consistent"

Because Tesla is neither competent nor consistent then the behavior of the stock market seems reasonable, ie buy for the promise and then sell when the promise is broken.

You got the clarification you needed in the second post. Drop it and move on, it's not that serious.

 

[MlautheFilthy]

Have they tried giving Musk more stocks? That way they will.. Marketplace of Ideas..AI AI ... Magic. ?????... Profit!!

 

[crazedgironemo]

Cybertruck and Semi were behind schedule largely due to dumbass design decisions. Tesla hasn't had much trouble producing traditional cars in reasonable time frames. It's totally possible for a compact crossover in 2025 if one is already in the works.

Apparently, there MAY be already one in the works. Musk has gone on record saying that Tesla could build a cheaper $25k car in 3 years time... as this article from 2018 shows... /s

 

[AmanoJyaku]

What are you talking about? Only one car in their entire history qualifies for that assertion, the Y; every other car they've made has undergone production hell.

If the compact crossover is based on the 3/Y platform I will trivially agree with you. If the compact crossover is a 100% designed from scratch car, I will emphatically disagree with you and I think we won't see their compact crossover until 2028.

Model S
Development 2007, First sale 2012

Model X
Development 2012, First sale 2015

Model 3
Development 2013, First sale 2017

Model Y
Development 2015, First sale 2020

The range from first known development to production is 3-5 years. Which isn't awful. As for your assertion 2028 is the earliest date for a compact crossover, again, that depends on how far along development is. I'm not dying on the hill of Tesla reaching any particular milestone, especially with Musk at the helm, but I'm not going to pretend it isn't possible just because I hate the guy.

 

[Dr Gitlin]

Random observation. Dr Gitlin has to be the most prolific commenter amongst Ars writers. I see him on almost every car article.

I’m one of the few remaining writers who came from the forums!

 

[agt499]

Random observation. Dr Gitlin has to be the most prolific commenter amongst Ars writers. I see him on almost every car article.

Random agreement: yes, and it's great when a writer is so inclined.

John Timmer is less prolific but excellent, and I do miss Jim Salter for his comments and articles (though it's nice to keep seeing h around the comments.

 

[quamquam quid loquor]

Random agreement: yes, and it's great when a writer is so inclined.

John Timmer is less prolific but excellent, and I do miss Jim Salter for his comments and articles (though it's nice to keep seeing h around the comments.

I love Jim Salter, another frequent commenter.

 

[fenris_uy]

In fact, the automaker warned that its vehicle growth rate may be "notably lower" in 2024

That was expected for everybody but the faithful. The investments to keep increasing production 50% as projected previously weren't there. They might increase production by 300k in 2024 but not much more than that.

 

[Baumi]

Good thing there are other OEMs out there that aren't Chinese that offer EVs right now... even though your sinophobia is irrational.

While I agree with the rest of your comment, I'd say there are rational reasons to be wary of Chinese companies dominating markets, as they're backed by an authoritarian government which is using its economic power to gain greater political leverage.

Of course, since China has become the manufacturing powerhouse of the world, completely avoiding Chinese products would be impossible. Still, trying to at least minimise one's own contribution to the ambitions of its regime isn't necessarily irrational.

(However, none of that would be a reason to support Musk in any way – like you said, there are plenty of other options out there.)