Elon Musk’s disappointing forecast

Elon Musk’s disappointing forecast

Tesla CEO Elon Musk

Musk tempered Cybertruck expectations and delayed Mexico plant plans owing to high interest rates

After Tesla’s earnings missed the mark, founder and CEO Elon Musk’s anxiety was evident.

The EV giant, which Musk had touted as “recession-resilient” a year ago, posted positive revenue growth but saw delivery, production, and average selling price all drop in the quarter ended Sept. 30. Its operating profit is still in the black, but has halved since the same time a year ago.

The usually ambitious and confident Musk took a cautious route, choosing to temper expectations and share his fears about the global economy during the earnings call yesterday (Oct. 19).

He emphasized the importance of making Teslas cheaper of late, and continued “harping on this interest thing”—rising interest rates dampening consumer spending—that “raises the cost of the car.”

In Mexico, Tesla is “laying the groundwork” to begin construction at the Monterrey, Mexico factory, but the company isn’t ready to go “full tilt” on it because of—you guessed it—“the high interest rate environment that we’re in.”

Pointing to the General Motors and Chrysler 2009 bankruptcy, Musk admitted to being more paranoid than he should be because has “PTSD…big time” from then. He doesn’t “want to be going at top speed into uncertainty,” especially with the ongoing Russia-Ukraine and Israel-Hamas wars.

In light of the doom-and-gloom call, Tesla’s stock sunk more than 9% before markets closed yesterday. And with it, other US industry players’ stocks slipped, too. Among them were Rivian (-5.1%), Lucid (-4.2%), and Fisker (-3.5%).

Charted: Tesla’s stock dropped on poor Q3 earnings

Quotable: Teslas need to be more affordable

“I just can’t emphasize this enough that the vast majority of people buying a car is about the monthly payment. And as interest rates rise, the proportion of that monthly payment that is interest increases naturally. So, if interest rates remain high or if they go even higher, it’s that much harder for people to buy the car, they simply cannot afford it. And we are tracking, I believe at this point for Model Y to be the best selling car on earth, but not just in revenue, but in unit volume. If you compare that to the other vehicles that are number two and number three and whatnot, they cost much less than our car. So, we’re just hitting law of large numbers situations here.”

Elon Musk on Tesla’s Oct. 19 earnings call

One big number: Cybertruck sales

250,000: Cybertrucks a year Tesla will end up with by 2025, according to Musk’s best guess. “Cybertruck’s one of those special products that comes along only once in a long while. And special products that come along once in a long while are just incredibly difficult to bring to market, to reach volume, to be prosperous. It’s fundamental to the nature of the newness,” Musk said on the call

2-9%: Drop in stocks of leading Chinese EV manufacturers like BYD, XPeng, Li Auto, Nio, and Geely this morning (Oct. 20), suggesting Tesla’s impact is global

$16 billion: How much Musk’s net worth dropped after Tesla’s earnings and stock slump, given that he owns 13% of the company. He’s still the richest man in the world, at time of writing.

One more thing: Toyota and Lexus adopt Tesla’s charging connector

Toyota and Lexus—following in the footsteps of other legacy automakers like Ford, GM, Honda, and BMW—are adopting Tesla’s charging connector called the North American Charging System (NACS). The alternative to the US’s own fast-charging standard, Combined Charging System (CCS), even got the White House’s vote of approval to partake in the federal government’s EV charging expansion plan. Tesla’s connectors are half the size and twice as powerful as the CSS ones.

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