Elon Musk had a distinct note of concern about the current economic climate, particularly the high-interest rate environment, during the 2023 third-quarter earnings call.
Tesla's earnings dropped by 37% from a year earlier, marking the smallest profit in two years. The company's third-quarter revenue saw a 9% boost from the previous year. However, Tesla fell short of Wall Street expectations on both fronts.
The company's profit margins have also slimmed. Its gross margin stood at 17.9%, a seven percentage point dip from a year ago. The adjusted automotive margin, a metric closely watched by industry experts, fell by nearly 11 percentage points to about 18%.
Interest Rates and Car Affordability
Musk began by highlighting that buying a car boils down to the monthly payment for most people. "The vast majority of people buying a car is about the monthly payment... as interest rates rise, the proportion of that monthly payment that is interest increases naturally," Musk stressed.
With rising interest rates, a larger portion of the monthly payment goes toward interest, making it difficult for many to afford the car. He stresses, "If interest rates keep rising, you just fundamentally reduce affordability."
This is a particular concern for Tesla, as they are tracking for the Model Y to be the best-selling car globally, not just in revenue but unit volume. Musk explains that high-interest rates can reduce the affordability of their vehicles, likening rising interest rates to an increase in the car's price.
Listen to Replay of the Earnings Call
Historical Lessons from 2009
Musk's concerns are not unfounded. He vividly recalls 2009 when General Motors and Chrysler filed for bankruptcy. Musk recounts Tesla's close brush with the financial crisis, detailing how they closed a financing round on Christmas Eve, without which they would have failed to meet payroll just two days after Christmas. The memory serves as a poignant reminder for Musk, who emphasizes, "I don't want to be going at top speed into uncertainty."
Despite the looming economic concerns, Tesla has growth opportunities. Giga Texas still has ample space to expand production, pointing out that they are "only occupying a tiny corner of the land that we have." However, Musk noted that one of their major challenges is personnel, as the greater Austin area has a limited population, which is further constrained by a housing crisis.
The Importance of Car Price
Musk touched upon price elasticity, comparing Tesla vehicles to other cars like the RAV4. He emphasized the importance of making Tesla vehicles more affordable for the majority, iterating, "Cost is not an optional thing for most people; it is a necessary thing." He further explained that due to rising interest rates, even though Tesla has reduced the prices of vehicles like the Model Y, the monthly payment for customers remains almost the same due to the increased interest component.
The Wider Banking and Credit Situation
Musk also dived into a more significant credit situation. He pointed out that acquiring credit has become a challenge for many. Many banks have become more cautious, and some, like Credit Suisse, have even collapsed, which was an unexpected shock for many. He added, "People are reading about wars all over the world. Buying a new car tends not to be front of mind.
Elon Musk's concerns mirror the more considerable anxieties surrounding the global economy. The call served as a reminder that even industry giants like Tesla are not immune to global economic shifts and uncertainties.
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Rendering of what Tesla's license plate feature could look like
Not a Tesla App
Tesla update 2024.38 has started rolling out to several regions and vehicles. Thanks to Tesla hacker Greentheonly, we have a behind-the-scenes look at some new features coming to Teslas.
License Plate Display
According to Greentheonly, it looks like Tesla may soon let you display your actual license plate in the vehicle’s visualization on the screen. In our article, The Most Request Tesla Features, several readers suggested displaying the vehicle’s license plate in the visualization instead of a blank, white plate.
It looks like Tesla will be doing just that, at least in China. Green found references that appear to conclude that you’ll be able to display your vehicle’s plate on screen. This will likely be user input, so you could have it say anything you’d like, and it doesn’t have to be your actual license plate.
For many owners, who may find it difficult to remember their license plate, this could serve a practical purpose in addition to adding to the visualization's realism.
While Green was only able to say it’ll be available in China, we expect this is due to China’s software development team working on it and that it’ll eventually be released worldwide.
While code for this feature was found in update 2024.38, we may not be turned on in China yet. We suspect this feature may be a strong candidate for Tesla’s upcoming holiday update.
FSD Hardware Version Display
As part of the 2024.38 update, Tesla has now made it easy to determine whether your vehicle includes Hardware 3 or Hardware 4. You can now simply navigate to Controls > Software and tap Additional Vehicle Information. In addition to other hardware information about your vehicle, your Autopilot hardware version will now be listed as well.
You can see whether your vehicle has HW2.5, HW3, or AI4. This in-car display is useful, but if you don’t have access to the vehicle, you can always use our guide on how to determine the hardware version of a Tesla.
New Battery Health Test & Service Mode Improvements
Green found some additional things as well. There’s a new and improved Battery Health Test. The new test will show you how your car scores compared to similar vehicles in the Tesla fleet.
In addition, maintenance records can now be permanently stored “in the car.” It doesn’t appear that this feature is activated yet, but it’s likely in active development with some parts leaking out in the 2024.38 update.
Tesla has included various Service Mode improvements and new visualizations in this update.
Mr Li on X came across some covered-up Project Juniper vehicles recently and he managed to get various shots of the vehicle.
Juniper Images
This front image reveals what looks like two rows of lights, possibly confirming the front light bar for the Model Y refresh — similar to the one on the Cybercab.
The rear side has a lot of lights on it!
Mr Li on X
The rear side shows a ton of brake lights, but it’s not clear why. While it looks like the Model Y refresh will also feature a rear light bar similar to the Cybertruck, there isn’t strong evidence of that in this photo.
Mr Li on X
There's an obvious set of lights at the bottom, so it looks like the Model Y refresh will be similar to the new Model 3 where the bottom lights can operate as brake lights when the one-piece tail lights and trunk are up.
Mr Li on X
In the last photo, we see that the overall form factor of the refreshed Model Y will remain unchanged, and Tesla is focusing the changes on the front and rear ends of the vehicle, much like the Model 3 refresh. However, in this one shot, we can also see what appears to be red light leaking out of the rear camera cover opening, possibly due to the rear light bar.
The Model Y is not only Tesla’s best-selling vehicle but also the world’s best-selling car in 2023. This year, it’s expected to be the best-selling vehicle in the United States and again in the world, so this refresh will be huge for Tesla.
@DominicBRNKMN made another fantastic set of concepts based on these new images. Given he had the most accurate Model 3 Highland concept before the official launch, we’re pretty sure his latest work be close here as well.
@DominicBRNKMN
We’re super excited to see the eventual reveal of Project Juniper, which is expected in the first half of 2025. However, expect to see a few more leaks before production kicks off at Giga Shanghai.
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