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“We could sell EVs for zero profit”: Tesla throws down gauntlet to car industry

Elon Musk has thrown down the gauntlet to the legacy car industry, saying that Tesla could sell its electric cars at “zero profit” and make money on autopilot technology, something he says other car makers would be unable to match.

Tesla is making a big play in 2023 in cutting costs, and prices of EVs. This is partly due to improved production techniques and lower input costs such as lithium, but it is also as much about the future of the car industry.

Tesla has been enjoying stella margins of more than 20% on its EVs, but is also facing increased competition from other EV specialists such as BYD. Its multiple price cuts in the US, China and Australia is as much about protecting its own market share as putting pressure on the rival car makers.

“There is there’s quite a powerful story here,” said Musk told investors during the Q1 earnings call.

“Tesla is in a uniquely strong strategic position because we’re the only ones making cars that technically we could sell for zero profit for now and then yield actually tremendous economics in the future through autonomy. No one else can do that.

“Not sure how many of you will appreciate the profundity of what I’ve just said, but it is extremely significant.”

Tipping an industry upside down

Indeed, some analysts say what Tesla achieving through improved manufacturing and changing business models is as profound as the impact Ford had with its original Model T. Even greater.

There is speculation that Tesla will soon release a much cheaper EV as low as $US25,000, but Musk this week chose only to refer to the “next-gen” car which will be akin to a “robo-taxi” and able to be driven entirely autonomously.

Tesla late Wednesday (US time) announced first quarter revenue of $US23.617 billion, operating income of $US2.7 billion, and earnings of $US0.85 per share, which was more or less in line with estimates. It still returned an impressive gross margin of 19.4 per cent.

In the first quarter, the Model Y became the best selling vehicle of any kind in Europe and the best selling non-pickup vehicle in the US, and Tesla also flagged first deliveries of the Cybertruck will be made at an event in the third quarter of the year.

The other big news from the earnings call was Musk’s promise to invest in lithium ore refining, and news of a 25 per cent reduction in costs on its new 4680 battery cells which are produced at its Texas Gigafactory.

Musk pleads for more Lithium refining

Musk also pleaded for more companies to invest in lithium refining suggesting that the refining of lithium, not mining, was the current bottleneck.

Tesla says that there’s been a dramatic decrease in lithium carbonate pricing from $US85,000 a tonne and today’s spot price is about $26,000 per tonne. Tesla says that at the quantities they’re procuring, they’re not as impacted by the spot market because they have long-term contracts in place.

One questioner asked whether the dramatic change in commodity prices was due to any recent overcapacity in mining and refining?

“On the lithium front I want to emphasise that the choke point is much more on refining capacity than it is on on mining,”  Musk responded. “Lithium is very common throughout the world, including in the US. It’s just a very common element on Earth,

“So it’s much more a question of where’s the refining capacity? And can the refining capacity keep up. That’s really what matters more than ‘where’ is the lithium ore. It’s everywhere, basically.

I think that same question also extends to refining of the cathode, and some degree refining of the anode and this is why at Tesla, we’re building our lithium refinery capability at Corpus Christi and our cathode refinery outside Austin (Texas).

“We will have by far the most lithium refining capability a cathode refining capability in North America. I think probably more than everyone else combined, by a lot.”

“Can other people please do this work. That would be great. We’re begging you,” joked Musk. “We don’t want to do it,”

Cybertruck delivery day in Q3 2023

Asked whether Tesla could give an update on Cybertruck specs and pricing, Tesla said that initial Cybertruck deliveries are planned for Q3 2023.

“Well I think we’ll save that for the Cybertruck handover which will hopefully be around the end of Q3 this year.” said Musk.

“One thing I am confident of saying is that it’s an incredible product. It’s a Hall of Famer.

“I think a product like this only comes along once in a long while. So it will not be disappointed at all. It’s amazing.”

This article was originally published by a thedriven.io . Read the Original article here. .

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