Tesla investor day

Tesla (NYSE: TSLA) held its long-awaited investor day yesterday. The event fell short of high expectations and the stock is down over 5% in US premarket price action today. Here are the key takeaways from the event.

Notably, markets were expecting some big and concrete announcements at the event. Investors were especially looking forward to the launch of a new lower-priced model. However, while Tesla teased two new models during the presentation, it did not elaborate.

Notably, Tesla’s mission is to accelerate the transition toward clean and sustainable energy. The company’s CEO Elon Musk said during the investor day, “There is a clear path to a sustainable-energy Earth. It doesn’t require destroying natural habitats. It doesn’t require us to be austere and stop using electricity and be in the cold or anything.”

Most countries are transitioning towards sustainable energy and are incentivizing electric cars and renewable energy. In the US, last year, President Biden signed the Inflation Reduction Act of 2022, which among others extended the $7,500 EV tax credit to automakers who had crossed the maximum threshold.

In one of the presentation slides, Tesla teased two new models. Musk however side-stepped questions on more details on the project and said, “We will have a proper sort of product event, but it would be jumping the gun if we answer your questions.”

Tesla to Build Next Gigafactory in Mexico

During investor day, Tesla confirmed that it would build its next Gigafactory in Mexico. The company stressed that it would supplement its current production and not replace production at any of the other sites.

Notably, in the past, US automakers have shifted production to Mexico to take advantage of low costs.

Tesla also reiterated its vision to build 20 million cars annually by 2030. The Elon Musk-run company produced 1.37 million cars in 2022 and delivered 1.31 million. In 2023, it expects to produce 1.8 million cars. Musk said that the company has the capacity to produce as many as 2 million cars in 2023.

Meanwhile, Tesla said that it has hit the milestone of producing 4 million cars. However, in order to produce 20 million cars annually, it would need to set up more Gigafactories. Currently, the company has four Gigafactories of which two are in the US and one each in China and Germany.

Musk Downplays Demand Concerns Yet Gain

Markets have been concerned about EV demand amid rising competition. In the past also, Tesla has downplayed demand fears and during the Q4 2022 earnings call, Musk categorically denied that there is any slowdown in demand for Tesla cars.

During investor day, Tom Zhu who heads Tesla’s global production said, “As long as you offer a product with value at affordable price you don’t have to worry about demand.” He was responding to a question on how TSLA plans to accelerate its market share in China, the world’s largest automotive market.

Currently, BYD is the market leader in China and offers multiple models across different price points. Berkshire Hathaway is a BYD investor and recently the conglomerate’s vice chairman Charlie Munger termed BYD his best investment.

Meanwhile, Musk believes that price cuts aided by operational efficiencies would fuel the demand for Tesla cars. He said, “Demand is a function of affordability not desire.”

Tesla CEO Zachary Kirkhorn also offered details on how Tesla was cutting costs. He also highlighted how the company plans to reduce operating costs for its upcoming vehicle platform.

Musk Talked about AI during the Investor Day

AI has been the buzzword among tech companies and reportedly Musk is also hiring a team to build a ChatGPT rival. While the billionaire was a co-founder of ChatGPT’s parent company OpenAI, he has lately been critical of OpenAI.

During the investor day, Musk said, “I’m a little worried about the AI stuff.” He added, “We need some kind of, like, regulatory authority or something overseeing AI development.”

Musk stressed, “Make sure it’s operating in the public interest. It’s quite dangerous technology. I fear I may have done some things to accelerate it.”

Meanwhile, Musk said that Tesla does not see AI helping it in manufacturing cars “any time soon.”

Tech giants are accelerating their AI plans. Baidu is looking to launch its AI chatbot Ernie in March, ahead of the original schedule. Several companies like Baidu, Nvidia, and Alphabet see AI as a key growth driver. There is a list of companies that are a play on AI.

Tesla Stock Falls after Investor Day

Tesla also downplayed concerns over the US-China rivalry impacting its business. Recently, China chided Musk over a tweet about the Wuhan lab leak theory. While Tesla initially got a red carpet welcome in China its relations with the country have somewhat soared and China even banned TSLA cars from some government facilities over spying concerns.

During the event, Tesla also showcased several leaders to highlight the depth in its executive team. Musk said, “We’ve obviously got significant bench strength here.”

All said, there were no mega announcements or long-term financial forecasts that markets are used to from Tesla’s events. The stock had run up around 65% before the event, partially in anticipation of big announcements.

The lack of details especially on the upcoming models dampened sentiments and Tesla stock is trading 5% lower in premarkets today. It is nonetheless the top S&P 500 gainer YTD and has recovered to nearly half of its all-time highs.

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