It’s getting harder for Tesla to make money

Tesla should introduce new tech and features. Otherwise, Tesla can only continue to lower the price.

Tesla’s third quarter earnings report, just released this morning, shows a definite decline in its financial performance compared to the same period last year.

Specifically, under the pressure of falling car sales prices and rising costs, Tesla’s revenue and profit metrics both declined, with total revenue down 9% YOY to $23.4 billion; gross profit was $4.18 billion, down 22% YOY; and GAAP net profit was $1.85 billion, down more than 40% YOY.

Tesla blamed the decline in net profit on a number of things.

For one, the company’s upgrades to its factories and reduced production have led to a drop in deliveries, while on the other hand, Tesla is investing heavily in artificial intelligence and has ‘commissioned one of the world’s largest supercomputers’, which has doubled its computing power compared to the previous quarter.

In terms of cash flow, Tesla reported cash flow from operating activities of $3.3 billion for the quarter, down 35% YOY and free cash flow of $848 million, down 74% YOY, with quarter-end cash balances up $3 billion from the previous quarter to $26.1 billion.

During the quarter, Tesla produced more than 430,000 vehicles worldwide and delivered more than 435,000 vehicles, of which nearly 16,000 were Model S/X deliveries and nearly 420,000 were Model 3/Y deliveries.

As you can see, sales of the Model S and Model X are still down (19,000 in the second quarter), despite significant price cuts. The lack of physical levers and ultrasonic sensors may have had a negative impact, but the reason for this is Tesla’s “lack of attention” to the S/X premium line.

Tesla should introduce new tech and features, such as integrated castings, 48V, 4680 batteries, etc. for the S and X rather than adding HUD, surround view camera, etc. Otherwise, Tesla can only continue to lower the price.

As for the Model 3 and Model Y, the total deliveries also declined slightly due to the generation gap of the former, but looking ahead, with the delivery of the new Model 3 and Cybertruck in the fourth quarter, Tesla expects that the full-year deliveries in 2023 will still exceed the 1.8 million set at the beginning of the year, which is still higher than the compound growth target of 50%.


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