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Business News/ Companies / News/  Elon Musk's investor call: From Robotaxi to Optimus robot, 5 crucial insights from Tesla's earnings call

Elon Musk's investor call: From Robotaxi to Optimus robot, 5 crucial insights from Tesla's earnings call

During the investor call on April 23, Elon Musk made a host of promises to investors and outlined the EV auto major's future plans and technology investments.

Tesla CEO Elon Musk told analysts he expects production of their cheaper vehicles to start by the second half of 2025. (Leon Neal / Pool via Reuters)Premium
Tesla CEO Elon Musk told analysts he expects production of their cheaper vehicles to start by the second half of 2025. (Leon Neal / Pool via Reuters)

Elon Musk makes multiple promises to investors, analysts for Tesla: Electric vehicle (EV) manufacturer Tesla saw its first-quarter net income plummet by 55 percent, in results released on April 23, AP reported.

The stock has however soared 11 percent in after-trading hours after CEO Elon Musk announced plans to accelerate the production of new, more affordable vehicles, the report said. Notably, this boost comes amid a challenging year for Tesla, with its stock declining by over 40 percent since the beginning of the year.

During the period from January to March, Tesla reported earnings of $1.13 billion, a stark contrast to the $2.51 billion recorded in the same period last year. The company's revenue for the first quarter totalled $21.3 billion, representing a 9 percent decrease compared to the previous year. This decline was attributed to increased competition and a slowdown in demand for electric vehicles worldwide.

Here's a look at what Elon Musk has promised:

Production expansion, and plans for cheaper vehicles

Investors and analysts were eagerly awaiting signals from Tesla regarding measures to address the decline in its stock price and stimulate sales growth.

In a letter to investors on April 23, Tesla announced that it would commence production of smaller, more affordable models earlier than initially anticipated. These models, including the much-anticipated Model 2 small car expected to be priced around $25,000, will use new generation vehicle underpinnings and incorporate features from current models, AP reported. Notably, production of these models will take place on existing manufacturing lines, negating the need for new factories or extensive production line expansions.

“This update may result in achieving less cost reduction than previously expected but enables us to prudently grow our vehicle volumes in a more capex efficient manner during uncertain times," the investor letter said.

During a conference call with analysts, Musk, indicated that production of the smaller models is projected to begin in the latter half of next year, potentially even by the end of this year. While Musk provided limited details on the new vehicles and whether they would be variants of existing models, he expressed optimism about surpassing last year's vehicle sales figure of 1.8 million units, as per the AP report.

Musk said he expects production to start in the second half of next year “if not late this year", adding that "New factories or massive new production lines won't be needed for the new vehicles." On specifics, Musk said they've "said all we will on that front".

EV is the Right Strategy

Musk also made critical remarks about competitors such as General Motors Co. and Ford Motor Co., who have been slowing down EV production to focus on revitalising their gas-electric hybrid offerings, Bloomberg reported.

“The EV adoption rate globally is under pressure and a lot of other auto manufacturers are pulling back on EVs and pursuing plug-in hybrids instead. This is not the right strategy," he said.

However, Tesla's own strategy has been unclear for much of 2024, the report added. Over the past year, it has reduced prices across its range in an attempt to boost sales, but this move has not resulted in increased demand for its vehicles.

Robotaxi and Tesla Transforming into an AI Company

During Tesla's first-quarter earnings call, Musk made a decisive declaration to investors: Tesla is now transitioning into an artificial intelligence (AI) company, Bloomberg reported.

Musk emphasized Tesla's commitment to solving autonomy, stating, “If somebody doesn’t believe Tesla is going solve autonomy, I think they should not be an investor in the company. But we will. And we are."

Throughout the call, Musk highlighted the company's autonomous vehicle and AI initiatives, envisioning a future where Tesla operates a fleet of millions of EVs as robotaxis, akin to popular ride-hailing services like Uber Technologies Inc.

Tesla's future plans also include allowing consumers to rent out their Tesla vehicles for rides, mirroring the model of home-sharing platform Airbnb Inc, the Bloomberg report said.

In its investor presentation materials, Tesla confirmed the development of a dedicated robotaxi as one of its forthcoming products, with further details set to be unveiled in August. The company revealed its intention to adopt a pioneering 'unboxed' manufacturing approach for the robotaxi, aimed at halving assembly costs.

“Our purpose-built robotaxi product will continue to pursue a revolutionary ‘unboxed’ manufacturing strategy," Tesla said, referring to its planned new vehicle production system intended to slash assembly costs in half.

Licensing Full Self Driving (FSD)

Musk also hinted at Tesla's potential expansion in self-driving capabilities, disclosing discussions with another automaker regarding the licensing of its Full Self Driving (FSD) features. Presently, advanced driver-assistance software requires drivers to remain attentive with their hands on the steering wheel.

Musk urged investors to experience FSD firsthand, stating, “I once again would just likely strongly recommend that anyone, who is I guess thinking about the Tesla stock, should really drive (FSD’s latest version). It is impossible to understand the company if you do not do this."

Promise of Optimus robots by 2025-end

Musk said Tesla's humanoid robot, dubbed Optimus, is still in development but could potentially be available for sale by the end of next year, Reuters reported.

The emergence of humanoid robots has caught the attention of various industries, including logistics, warehousing, retail, and manufacturing, where they could alleviate potential labour shortages and undertake repetitive or hazardous tasks, it added.

Musk during the investor call said he anticipates Optimus to be operational in Tesla's factories by the close of this year. "I think Tesla is best positioned of any humanoid robot maker to be able to reach volume production with efficient inference on the robot itself," Musk said on the call, referring to AI abilities.

Musk expressed confidence in Tesla's ability to achieve mass production of humanoid robots, foreseeing it as a significant aspect of the company's business in the future.

Challenges, Road Ahead, and Future Prospects

Despite the positive outlook, Tesla faces challenges, including maintaining profitability and addressing concerns about its autonomous driving technology.

The company's gross profit margin declined to 17.4 percent, down from 19.3 percent a year ago. Additionally, Tesla has encountered setbacks in its autonomous driving ambitions, with recalls issued for its FSD system due to safety concerns.

Looking ahead, Tesla remains optimistic about the potential of its autonomous driving technology, with Musk emphasising the inevitability of surpassing human reliability, as per AP. However, uncertainties persist regarding the timeline for achieving full autonomy and the practicality of Tesla's camera-based approach.

(With inputs from AP, Bloomberg and Reuters)

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Published: 24 Apr 2024, 09:27 AM IST
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