Tesla has increased their expected spend in areas like R&D
Tesla
Tesla has revised its capital expenditure estimates for 2023, just days after its third-quarter earnings call. Investors did not like what they heard during the call, as the stock dropped 15 percent. Now, the company is signaling robust growth and a sustained commitment to innovation and expansion.
Stepping Up Spending
Tesla recently revealed in a filing with the Securities and Exchange Commission (SEC) that its expected capital expenditures in 2023 would now surpass $9 billion, up from its previous estimates, which oscillated between $7 billion and $9 billion. Notably, the company projects similar spending levels for 2024, emphasizing that this increase was not a spur-of-the-moment decision but a result of consistent positive cash flow generation.
The company stated: "Our business has been consistently generating cash flow from operations in excess of our level of capital spend." Improved working capital management has also played a pivotal role, enabling faster cash inflows from sales than outflows for payables.
Prioritizing Research and Development
Tesla's commitment to innovation is evident in its R&D spending. A focus on this area distinguishes Tesla from many competitors. Last year, data showed that Tesla's R&D spend per car was a whopping $2,984, three times the industry average. This investment reflects the company's relentless pursuit of technological and engineering advancements.
More R&D will be on the horizon as the Model 2, also known as the Next Gen or the $25,000 car, nears production. This vehicle is predicted to sell more than all of Tesla's vehicles combined. It is also the car expected to be used for the robotaxi, the completely autonomous vehicle.
Advertising
This heightened investment comes after Tesla announced its third-quarter earnings of $23.35 billion in revenue, delivering 435,059 vehicles and producing 430,488 units.
Despite this hefty R&D expenditure, Tesla's marketing strategy remains unique. Historically, the company hasn't allocated funds for advertising. However, a subtle shift is on the horizon, with Elon Musk confirming limited advertising endeavors are underway as the company researches the best bang-for-the-buck advertising spend.
The CEO also mentioned advertising during the earnings call, emphasizing affordability. "I know people want us to do advertising; we are advertising. I think there's something to be gained on the advertising front. I don't think it's nothing. Informing people of a car that is great but they cannot afford doesn't really help." To become more affordable, the company will have to do more R&D.
As the company broadens its horizon, inevitable fluctuations in capital expenditures are anticipated, primarily due to the pace of its capital-intensive projects, potential shifts in material prices, and variances in supply chain and labor costs.
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Tesla China has outlined some features in Tesla’s latest update in the region, which is version 2024.26.9. In the list of features, Tesla mentions many of the features we’re already aware of, including Automatic Emergency Braking Improvements, YouTube Music and more, but they also reveal one additional feature that’s exclusive to China. The new feature allows the new blind spot indicator to light up if there’s something in the way when you’re opening your door. The blind spot indicator is exclusive to the new Model 3 and Cybertruck, which features little red LEDs in the front speaker grills next to the mirror.
Blind Spot Door Warnings
With update 2024.26.9, Tesla says that if any vehicle door handle button is pressed on vehicles with a Blind Spot Warning Light (currently just the 2024 Refreshed Model 3 Highland and the Cybertruck), the blind spot warning indicator in the vehicle’s front speakers will illuminate.
This object detection includes cars, pedestrians, cyclists, and “other objects”. We’re not quite sure what fits into the “other objects” category, but likely things that FSD picks up on normally – including traffic cones, bollards, and other large obstacles.
According to Tesla’s description, there appears to only be a visual warning for the driver and front passenger, with nothing displayed on screen or an audible tone. We’re sure Tesla will continue to expand and refine this feature like they’ve done with various features in the past, but for now, it's only available in China. Blind Spot Door Warnings need to be enabled under Controls > Safety before this feature will function.
We’d love to see Tesla use the ambient light strip in the vehicle to warn passengers and drivers when their door is obstructed – it would be a fantastic use of a luxury feature for utilitarian safety – rather than just the single red LED inside the door speaker. Additionally, an audio warning would be excellent for those who may not see the red dot.
Tesla appears to be making progress on FSD in China, with the latest update available in the region now displaying the FSD button in the vehicle. Tesla makes no note of the change in the release notes, nor does it appear to be available in any other regions that are expected to receive access to FSD in the future.
FSD in the UI
In the Autopilot options in China, users could previously select Traffic-Aware Cruise Control or Auto Steer (Beta), however, as of 2024.26.9, the Full Self Driving (Supervised) button is now visible – but greyed out. Tapping on the option doesn’t do anything just yet, but the addition of the button could be a hint that Tesla is planning to enable the feature soon.
Underneath the Autopilot selection, Tesla also has a phrase that says, “Full Self-Driving (Supervised) needs to use an updated version of navigation maps. Connect to Wi-Fi to download” (Thanks, Luis Zhu). It’s possible the option is greyed out because the software needs updated maps to work. There are no reports yet of what happens when the navigation map is downloaded.
We previously reported that FSD was on hold in China, even after Tesla received approval to start testing FSD in China. This flip-flopping is interesting but could be due to regulatory issues between China and Tesla regarding data collection and where the data is stored. Now that the button is in the UI – Tesla is clearly confident that it either has received approval or will in short order.
It certainly appears that Tesla is going to be opening up FSD in the region fairly soon. It’ll be interesting to see if Tesla uses the same Safety Score feature they used in the U.S. when choosing drivers to beta test the program.
Elon Musk previously mentioned that FSD (Supervised) would be rolling out to global markets, including Europe and China, as Tesla received approvals from governments in those nations.
