During the Q3 earnings conference call, management also noted that high interest rates are posing a challenge to the company. Although Tesla is “adjusting” the prices of its vehicles monthly, it is cutting costs simultaneously. However, the lags between those moves have hurt the company’s margins.
As for the Cybertruck, Musk admitted that building prototypes is easy, but production isn’t, and said that Tesla will have to work really hard to “reach volume production and be cash flow positive at a price that people can afford.” Musk said it could be 12 to 18 months before the all-electric truck starts contributing meaningfully to Tesla’s cash flows.
Why Tesla stock could remain under pressure
Tesla remains undeterred on its growth plans. It expects to grow production rapidly to reach 1.8 million vehicles this year versus 1.37 million vehicles last year. The company is also prioritizing cost reduction, but expects to continue investing in R&D, and it has ample liquidity with which to do so. Tesla also remains on track to deliver its first Cybertruck later this year.
Tesla continues to enjoy strong demand for its EVs, and is growing its revenue steadily despite cutting its prices several times this year, but the company’s latest report is a reminder that building EVs is a costly business. While factory upgrades drove Tesla’s production costs higher, the EV maker also incurred large expenses on research and development (R&D), its artificial intelligence (AI) projects, and the Cybertruck.
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