Tesla profits dip as it invests in factory upgrades and AI development

Tesla continues to see its margins slip as a consequence of value cuts. Right now the corporate reported earnings of $1.9 billion in internet revenue on $23.4 billion in income through the third quarter of 2023. The figures symbolize a small bump in income, from $21.4 billion the identical time final yr, however a giant dip in earnings, falling from $3.3 billion on near the identical quantity of income.

Tesla pointed fingers in a number of instructions. For one, manufacturing was lowered whereas the corporate upgraded its factories, resulting in a giant dip in deliveries. The corporate additionally says it’s making large investments in AI and has “commissioned one of many world’s largest  supercomputers,” doubling its compute capability since simply final quarter.

Nonetheless, the drop in quarterly income was one other disappointing flip for the corporate after Tesla’s Q3 supply and manufacturing numbers fell wanting expectations. Tesla had warned that deliberate shutdowns of its Austin, Texas, and Shanghai factories for upgrades would lead to fewer automobiles produced and delivered. However even bullish traders had been wringing their palms over the slimmer numbers.

On prime of all the things, there’s persistent chatter about Tesla’s revenue margins, why they’re so low, how a lot decrease they will go, and extra. You’ll recall that Tesla used to have historic revenue margins, typically as a lot as 20 p.c, which is usually unparalleled within the auto {industry}. However rampant value slicing (good for customers!) has induced Tesla’s once-vaunted margins to drop into extra earthly territory (dangerous for traders). Thus the hand wringing.

So, as you possibly can think about, issues aren’t precisely hunky-dory within the Home of Musk. Delayed Cybertruck! Dwindling revenue margins! And the continued sideshow at X / Twitter, which has clearly forged an unfavorable gentle on Musk’s fame and acumen as a supposed enterprise genius.

The continuing autoworkers strike has been portrayed by lots of Tesla’s boosters as a singular alternative given its nonunion workforce. But it surely’s a bit reductive, and Tesla’s lackluster quarter might make a few of these predictions look flimsy. By most metrics, the corporate continues to be doing very effectively: it instructions roughly 60 p.c of the EV market. Demand is excessive, and Tesla is taking benefit by slicing, slicing, slicing. However Tesla’s not resistant to broader disruptions that undermine the industry-wide shift to EVs.