On October 19th Beijing time, Tesla released its financial report for the third quarter of 2023, but it did not bring much good news.
Net profit has decreased by 44%, and production of Cyber Trucks is facing difficulties. These news have made Tesla CEO Musk appear somewhat frustrated during the financial report call, "I cannot tell you how much blood, sweat, and tears it will take to achieve this goal.
Perhaps due to this impact, Tesla's US stock market fell more than 7% before the market.
I have had post-traumatic stress disorder (PTSD) since 2008, and it was also very difficult from 2017 to 2019, "Musk told the conference about his entrepreneurial process.
He likened Tesla to a ship with extremely strong capabilities, but unfortunately, the ship may now be experiencing a storm of macroeconomic conditions. "Even giant ships in the storm will face challenges," "The automotive industry also has a certain periodicity, and if economic difficulties... we have always needed food, but not necessarily cars first.
Net profit decreased by 44% in the third quarter, and operating profit margin decreased
Although it was already 14 years ago, it was still deeply imprinted in my mind because Tesla's life was on the line at that time. "Musk recalled Tesla's" darkest hour "multiple times during a conference call, and on Christmas Eve, if Tesla did not complete the financing on time, it might not be able to pay wages.
Tesla's report for the third quarter of this year was not good enough to make Musk recall the 'painful past'.
Looking at the good news, Tesla's total revenue in the third quarter of this year increased by 9% year-on-year, reaching $23.4 billion. Due to the growth in vehicle delivery and other parts of the business, revenue has achieved good results.
But the negative news is that Tesla's operating revenue, net profit, and operating profit margin have all experienced a significant decline. Among them, the operating revenue decreased to 1.8 billion US dollars year-on-year, and the operating profit margin was 7.6%. This is mainly due to the increase in operating expenses caused by Cyberrack, AI, and other research and development projects; Production ramp up costs and idle costs related to factory upgrades; Negative foreign exchange impact.
It should be noted that the year-on-year decrease in Tesla's average selling price (excluding foreign exchange effects) has also had a negative impact on revenue.
If viewed from a net profit perspective, Tesla's net profit attributable to common shareholders (GAAP) has hit its lowest level in five quarters from last year: $3.292 billion in the third quarter of last year and $1.853 billion in the third quarter of this year, a significant decrease of 44%. At the same time, Tesla's operating profit margin has also significantly decreased, dropping from 17.2% in the third quarter of last year to 7.6%.
Fortunately, Tesla does not lack cash flow and has sufficient liquidity to fund product roadmap, long-term capacity expansion plans, and other expenses.
Driven by $2.3 billion in financing activities and $800 million in free cash flow, cash, cash equivalents, and investments continued to grow by $3 billion at the end of the third quarter, reaching $26.1 billion. So far this year, Tesla's free cash flow has reached $2.3 billion.
It should be noted that total automotive revenue is no longer Tesla's sole profit pillar. According to the financial report, Tesla's total gross profit in the third quarter exceeded $500 million, and its energy production and storage business, as well as services and other businesses, have become important contributors to our profitability.
Specifically, the total revenue of automobiles in the third quarter of 2023 was $19.625 billion, a slight decrease from $18.692 billion in the third quarter of 2022. Meanwhile, the energy production and storage business achieved $1.559 billion in the third quarter, an increase from $1.117 billion in the third quarter of last year.
During the financial report call, Musk stated that Tesla FSD's global testing mileage has reached 500 million miles (approximately 803 million kilometers). Due to the increase in data volume and the demand for humanoid robot business, Tesla's artificial intelligence training computing volume has more than doubled in the third quarter.
Tesla's deployment of energy storage in the third quarter was 4 gigawatt hours (equivalent to 4 billion watt hours), a year-on-year increase of 90%, making it the highest quarterly installed capacity in history. Tesla believes that energy storage is becoming one of the company's most profitable and promising businesses. Currently, the energy and services sector has contributed over $500 million in quarterly profits to the company.
Multiple production lines closed, and production decreased month on month in the third quarter
The main driver of Tesla's revenue is still car sales. Among the four models currently owned by Tesla, the S/X, which is positioned as a more high-end and expensive model, is not optimistic. The total production in the third quarter was 13688 units, a year-on-year decrease of 31%. The total sales in the third quarter were 15985 units, a year-on-year decrease of 14%.
However, the more user-friendly 3/Y data is much better. In the third quarter, production was 416800 vehicles, a year-on-year increase of 20%, and sales in the third quarter were 419074 vehicles, a year-on-year increase of 29%.
In the first three quarters of this year, Tesla delivered over 1.324 million vehicles globally, exceeding the total delivery volume for the entire year last year.
However, it should be noted that Tesla's total production in the third quarter was around 430000 vehicles, a significant decrease compared to nearly 480000 vehicles in the second quarter.
Tesla explained that this is because during this quarter, Tesla closed multiple production lines in order to upgrade at various factories, resulting in a continuous decline in production. However, Tesla remains optimistic about future sales expectations.
For example, in Shanghai's super factory, in addition to the planned shutdown in the third quarter, the factory has successfully operated at nearly full capacity for several quarters, and Tesla expects no significant improvement in weekly production operating rates. Shanghai remains our main export center.
For example, in Berlin Brandenburg, Germany, the Model Y remains the best-selling car in Europe so far this year, and similar to Texas, further production of the Model Y will be gradual.
Tesla has still not given up on its pursuit of sales, and is expected to maintain a long-term compound annual growth rate of over 50% this year, with 1.8 million vehicles remaining its annual target.
Due to the adverse macroeconomic impact, some Tesla factories have even experienced shutdowns (according to the financial report, "our planned factory shutdowns"), but at the same time, Tesla is also adding new factories.
The continuous decline in sales costs emphasizes the possibility of future price reductions
Vehicle pricing is the most concerning issue for consumers and a must-have topic for Musk's quarterly conference calls.
Tesla's financial report shows that the company's main goal remains unchanged in the third quarter of 2023: to reduce costs per vehicle, generate free cash flow, while maximizing delivery, and continuing to invest in artificial intelligence and other growth projects.
Tesla disclosed that in the third quarter, the company's cost of sales per vehicle decreased to approximately $37500. Although the production costs of the new factory are still higher than those of the existing factory, Tesla implemented necessary upgrades in the third quarter to further reduce unit costs.
Talking about Cyber Trucks is quite pessimistic, weighing production faces huge challenges
Previously, Tesla's upcoming cool looking Cybertruck received much attention. During the earnings call, Musk introduced that this truck would be delivered at a Texas super factory in November. Musk stated that the order volume had exceeded 1 million units, and in the future, Tesla will eventually produce approximately 250000 Cybertrucks per year. It is expected that the production capacity will ramp up in 2025.
However, it should be noted that Musk expressed pessimistic expectations for Cybertruck at this meeting, believing that achieving mass production of Cybertruck will face a "huge challenge" and that it will take approximately 12-18 months to achieve positive cash flow.
He referred to developing Cyberrack as digging his own grave, stating that it was "difficult" to push this product to the market, achieve mass production, and make money. Because Cyberrack looks completely different from existing electric vehicles, involving many unknown fields, and the results are also very difficult to predict. The complexity of Cyberrack may even affect its production growth.
In fact, Tesla has already made efforts to reduce the cost of Cybertruck. Tesla's financial report shows that for very heavy vehicles, the high-voltage powertrain architecture has brought significant cost savings, which is why Cybertruck will adopt an 800 volt architecture.