Tesla Inc. and its outspoken CEO, Elon Musk, went into this week’s earnings call on shaky ground.
The electric vehicle maker slashed prices across its lineup by up to 20 percent mid-January amid softening global demand and growing inventories. New revelations claimed Tesla faked a video promoting its driving-assistance software. And Musk faced his own legal troubles just before the call.
Musk testified earlier in the week in a shareholder lawsuit claiming he defrauded investors by posting on Twitter in 2018 that he had secured funding to take Tesla private. The deal never happened.
Separately, testimony this month by a Tesla engineer came to light alleging the automaker staged a 2016 video to promote its Autopilot driver-assistance software, which is at the center of regulatory probes.
Despite all that, Tesla and Musk emerged mostly unscathed from Wednesday’s fourth-quarter earnings call after beating fourth-quarter financial expectations and projecting strong growth for 2023. Tesla’s stock price surged 11 percent Thursday to $160.27 at close, up 48 percent so far this year.
The January vehicle price cuts juiced global demand to the point where orders are now running twice as fast as vehicle production, Musk said on the call.
“The most common question we’ve been getting from investors is about demand,” Musk said. “I want to put that concern to rest: Thus far in January, we’ve seen the strongest orders year to date ever.”
Tesla projected automotive gross margins above 20 percent, which eased analyst concerns that the price cuts could decimate profits. Musk also forecast up to 2 million in global sales this year — up from 1.3 million in 2022. Tesla’s official estimate for 2023 is 1.8 million.
“Despite our general caution on the EV market early in 2023, we make Tesla our new top tick in U.S. auto,” Morgan Stanley’s Adam Jonas said in a research note. Tesla, the firm said, is likely to win the price war. “We question whether competitors can keep up in this EV race.”
Other analysts echoed the bullish tone for Tesla, which already holds a 65 percent share of the U.S. EV market and newly qualifies for tax incentives of up to $7,500 per vehicle.
Adding up the price cut and full EV credit, Tesla’s top-selling Model Y is now about $20,000 less expensive for U.S. customers who qualify for the tax incentive.
There was also some bad news from the earnings call: The Cybertruck pickup won’t reach volume production until 2024, nearly five years after it was first presented.
And Musk awkwardly sidestepped an investor question about sinking brand sentiment in response to his controversial posts on Twitter, which he bought late last year.
“Let me check my Twitter account,” Musk said on the call. “I’ve got 127 million followers. It continues to grow very rapidly. That suggests that I’m reasonably popular. I might not be popular with some people, but for the vast majority of people, my follower count speaks for itself.”
But Musk’s critics are expressing frustration that financial analysts and regulators appear to be looking away from the automaker’s biggest weaknesses.
Tesla’s elevated market value depends, in part, on its driver-assistance software making the transition to full autonomy. Musk said on the call that the company’s unfinished Full Self-Driving feature offers “tremendous upside potential” for the automaker because its current $15,000 price is essentially “100 percent gross margin.” The software is in the beta, or test, phase and still relies on a human driver.
Sam Abuelsamid, principal analyst for e-mobility at Guidehouse Insights, said Tesla’s standard Autopilot software and optional Full Self-Driving feature have gotten a pass from regulators despite a spate of vehicle crashes and statements by the company that some have called misleading.
A recent example is a Jan. 17 Reuters report that a 2016 Tesla video was allegedly staged to show driving capabilities that the software is incapable of performing. The story quoted testimony by Ashok Elluswamy, director of Autopilot software, as part of a lawsuit following a 2018 fatal crash.
“Everybody that’s been paying attention has known for years the video was faked,” said Abuelsamid. “That somebody from Tesla would actually admit it, under oath, was somewhat of a surprise.”
Separately, NHTSA said last month that it opened two new special investigations into crashes involving Tesla vehicles where driver-assistance software was suspected to be in use. The accidents, including a dramatic pileup on San Francisco’s Bay Bridge, resulted in minor injuries.
NHTSA has multiple open investigations into Tesla-related crashes that go back several years, but the automaker has escaped serious consequences so far, Abuelsamid said.
“What should happen is that regulators somewhere need to say: ‘Look, you’re selling something that doesn’t work as marketed, and you need to give customers back their money,’ ” Abuelsamid said.
That would likely deliver a punishing financial blow to Tesla, which is planning to build a dedicated robotaxi without human controls as early as next year.
Tesla has a market capitalization of about $500 billion, compared with Ford Motor Co. and General Motors at about $50 billion each. But without autonomous cars, Tesla could see a market valuation closer to its peers, Abuelsamid said.
“These cars are never, ever going to be able to operate as robotaxis,” he added. “So they’re pricing the stock based on a myth.”