Tesla Inc. chief executive Elon Musk, who runs a company with a valuation of close to $ 300 billion, does not want the electric vehicle maker to be “super profitable.”
He got away with it in the second quarter, when Tesla made a profit of $ 104 million thanks to more than $ 400 million in electric vehicle tax credits and Musk’s push to reopen his Fremont, California factory, despite the Asking for refuge in the place the CEO described him as “fascist” in a deranged protest three months ago. That profit puts Tesla in a position to join the S&P 500 index, a possibility that has fueled an indescribable career for Tesla TSLA,
The shares, which have more than doubled in the past three months, nearly quadrupled in 2020 and gained more than 500% in the past 12 months.
Typically, profits like that are reserved for companies that are on the road to making big profits or that have multiple proven businesses. However, not in the case of Tesla.
“We need to, you know, not go bankrupt, obviously that’s important … But we’re also not trying to be super profitable,” Musk said at the end of the Wednesday conference call.
“I think we just want to be a little bit profitable and maximize growth and make the cars as affordable as possible.”
Little more Musk had to say on Wednesday could justify rising shares amid a pandemic that has slowed auto sales this year. Some investors are confident that Tesla will become Apple Inc. AAPL,
from the automotive world, offering services for their cars that offer a constant monthly income stream. When asked by an analyst that way on Wednesday, Musk said they were “putting some games and stuff in the car, for fun,” but offered no other potential revenue stream beyond autonomous driving, which Tesla has been charging Customers willing to purchase time and expect to make a subscription offer.
“FSD [fully self-driving] it remains by far the biggest opportunity in the short term, “he said, adding that a major improvement in the system will” probably “come later this year and” outperform everything “in terms of reliability.
If that is an investment thesis for something short term, it is wrong. Musk continues to exaggerate the autonomous driving capabilities of his company’s cars, while offering advanced driver assistance systems that are not much different from those of other automakers. Musk has failed to meet many goals in autonomous driving, such as taking a hands-free road trip across the country, which has been delayed several times since Musk first promised it would happen in late 2017.
Musk reiterated on Wednesday that full autonomous driving capabilities would make Teslas on the market five times more valuable, and said he knows the system should be ready by the end of the year because he is driving his car from home to work fully mode. driving, with only limited failures.
“It is incredible,” said Musk. “So, I’m almost reaching the point where I can go from home to work without intervention. Despite going through construction and very diverse situations. So that’s why I have so much confidence in total self-driving and functionality … by the end of this year. Because I literally drive it. ”
While Musk’s car can follow a defined route on California highways with just a few problems every day, that’s far, far, far away from where the software should be to charge millions of Tesla cars worldwide. with the confidence that you will be able to drive them safely, in highly variable weather conditions. Describing the service as “by far the biggest short-term opportunity,” as Musk did on Wednesday, is an insult to the term “short-term.”
Solar power is another area in which Musk has high hopes, as Tesla’s sunroof installations more than tripled in the second quarter compared to the first quarter. However, Tesla’s power generation and storage division has largely languished since the conflicting acquisition of Musk’s cousin company SolarCity. The segment had $ 293 million in revenue in the second quarter, down from $ 324 million in the prior year period, and very little suggests there will be any gains there anytime soon.
Tesla has taken great strides to build its increasingly popular cars and add new plants to meet demand, but with stock at these levels, investors need to know what will happen when Tesla finally meets all demand for its electric vehicles. Can solar and autonomous driving software updates provide the additional revenue streams that would justify Tesla’s market capitalization, especially while “not trying to be super profitable”? It is doubtful, and nothing announced Wednesday resolves doubts.
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