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Tesla earnings dip because it invests in manufacturing unit upgrades and AI growth

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Tesla continues to see its margins slip resulting from worth cuts. At this time the corporate reported earnings of $1.9 billion in web revenue on $23.4 billion in income in the course of the third quarter of 2023. The figures characterize a small bump in income, from $21.4 billion the identical time final 12 months, however an enormous dip in earnings, falling from $3.3 billion on near the identical quantity of income.

Tesla additionally missed its target date for a Cybertruck delivery event. Tesla CEO Elon Musk had deliberate for a handover occasion someday within the third quarter, and the corporate now plans for its first deliveries to happen on November 30th. Throughout an earnings name, Musk mentioned the Cybertruck will take “18 months earlier than it’s a big money movement contributor.”

The corporate’s working margins fell for the third quarter in a row, signaling that Tesla’s rampant price cutting was continuing to take a toll on its bottom line.

The Cybertruck is coming… lastly

Tesla pointed fingers in a number of instructions. For one, manufacturing was lowered whereas the corporate upgraded its factories, resulting in an enormous dip in deliveries. The corporate additionally says it’s making large investments in AI and has “commissioned one of many world’s largest  supercomputers,” doubling its compute capability since simply final quarter.

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Nonetheless, the drop in quarterly income was one other disappointing flip for the corporate after Tesla’s Q3 delivery and production numbers fell in need of expectations. Tesla had warned that deliberate shutdowns of its Austin, Texas, and Shanghai factories for upgrades would end in fewer automobiles produced and delivered. However even bullish traders had been wringing their fingers over the slimmer numbers.

On high of every thing, there’s persistent chatter about Tesla’s revenue margins, why they’re so low, how a lot decrease they’ll go, and extra. You’ll recall that Tesla used to have historic revenue margins, generally as a lot as 20 p.c, which is usually exceptional within the auto {industry}. However rampant worth reducing (good for shoppers!) has triggered Tesla’s once-vaunted margins to drop into extra earthly territory (unhealthy for traders). Thus the hand wringing.

So, as you possibly can think about, issues aren’t precisely hunky-dory within the Home of Musk. Delayed Cybertruck! Dwindling revenue margins! And the continuing sideshow at X / Twitter, which has clearly forged an unfavorable gentle on Musk’s repute and acumen as a supposed enterprise genius.

Not every thing is so gloomy, although. Tesla’s stagnant lineup bought a much-needed refresh this quarter, with up to date variations of the Model 3 coming to Europe and a equally spiffed-up Model Y set to arrive in China. Apart from lacking its supply occasion, the Cybertruck kept popping up on varied highways and aspect streets of Texas and California. More automakers additionally bent the knee to Tesla’s EV North American Charging Standard.

In fact, all issues being even, Tesla’s varied authorized quandaries continued to develop. Another civil rights agency sued the corporate over its lengthy historical past of racial harassment of Black staff at its Fremont, California, manufacturing unit. And a lawsuit from the family of a deceased Tesla owner asks whether or not the corporate must be chargeable for deadly crashes involving its partially autonomous driving tech.

The ongoing autoworkers strike has been portrayed by a lot of Tesla’s boosters as a singular alternative given its nonunion workforce. But it surely’s a bit reductive, and Tesla’s lackluster quarter may make a few of these predictions look flimsy. By most metrics, the corporate continues to be doing very nicely: it instructions roughly 60 p.c of the EV market. Demand is excessive, and Tesla is taking benefit by reducing, reducing, reducing. However Tesla’s not proof against broader disruptions that undermine the industry-wide shift to EVs.

Replace October 18th, 2023 6:04PM ET: Added quote from Elon Musk on Tesla earnings name.

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