Elon Musk predicts mild 18-month recession, teases share buybacks

Tesla CEO Elon Musk gestures as he visits the Tesla Gigafactory construction site in Gruenheide, near Berlin, Germany, on August 13, 2021.

Patrizio Pleul | Reuters

At Tesla’s 2022 shareholders meeting Thursday, investors asked CEO Elon Musk how the company plans to spend its money in the coming years and what its global economic prospects are.

Musk joked that “macroeconomic forecasting is a recipe for disaster”, but still estimated that “we have passed the inflation peak” and will likely see a “relatively mild recession” lasting about 18 months.

The CEO based his economic analysis on commodity prices that Tesla is asked to pay for the materials and goods it needs to produce electric vehicles.

“We get a good insight into where the prices of things are going over time because when you make millions of cars, you have to buy goods many months in advance of when they are needed,” he said.

In the second quarter of 2022, Russia’s war on Ukraine and the ongoing Covid pandemic in China hampered Tesla’s Shanghai factory and worsened supply chain growls, shortages of parts and labor problems throughout. the automotive sector.

Musk was also asked how Tesla plans to use his capital in the coming years. The CEO said Tesla will primarily increase its capital expenditures and research and development expenses “as fast as possible without wasting them.” He added that “some kind of share buyback is possible,” depending on what Tesla’s future cash flow will look like.

Musk, who is also the CEO of SpaceX, said he “would not want to commit to” Tesla stock repurchases just yet and that a force majeure event somewhere could change the equation. However, he reiterated that if Tesla’s future cash flow looks solid and the world is “relatively stable”, then a “share buyback is on the table”.

20 million cars a year in around 12 factories by 2030

Overall, Tesla aims to produce 20 million vehicles per year by 2030, an ambitious target, and Musk said he thinks it will take about a dozen factories, with each factory producing 1.5 million to 2 million. units per year.

Tesla currently operates vehicle assembly plants in Shanghai; Fremont, California; Austin, Texas; and outside Berlin in Germany. It also manufactures batteries at a factory in Sparks, Nevada, which it manages with Panasonic.

Tesla recently produced its 3 millionth car, Musk said Thursday, and hopes to announce a new factory location later this year.

At the same time, the company is only recycling 50 vehicle battery packs a week in Nevada, Musk revealed on Thursday, explaining that the number is so low because most Tesla car battery packs are still in vehicles in use today.

During the shareholders’ meeting, the famous CEO also reiterated past promises, including that Tesla is getting closer to the goal of “resolving autonomy” and providing a self-driving vehicle capable of functioning as a robotaxi. without any driver behind the wheel.

He delighted shareholders by asking for their input on where to set up the next Tesla factory (many shouted “Canada”) and telling the room apparently full of retail investors that they understood the company better than finance professionals, including Wall Street analysts. .

But he also broke some disappointing news to shareholders, reiterating that Tesla is aiming to produce the Cybertruck in mid-2023 but will not be able to sell it with the same specs and pricing originally provided when the company unveiled the experimental pickup in 2019.

Of the Cybertruck’s expected higher price, Musk said, “I think there’s no way to anticipate the inflation we’ve seen.” Tesla will “install manufacturing equipment, tools and everything else, starting in the next two months” at its Austin, Texas factory, where the shareholders’ meeting was held Thursday.

Musk bragged during the meeting that Tesla and his reusable missile company SpaceX are two of the places engineering students want to work the most today. Tesla received 3 million job applications last year, he said. He also revealed: “We allow people to move from one company to another if they wish,” referring to his two businesses. “It’s great, we support it.”

Audience members at the in-person meeting were selected via a random draw, while other shareholders tuned in to live streaming videos online. Attendees at the live event offered raucous mockery to shareholders who made proposals that Tesla’s board of directors disagreed that they should approve.

A shareholder took the microphone during a question and answer session, gave up his right to ask Elon Musk a question and instead beat the media for their treatment of Musk and thanked the CEO for “making the world a best place “. The shareholder also greeted his 6-year-old son at home who, according to him, was watching the corporate event at home. He got a standing ovation.

Tesla bull and managing partner of The Future Fund, Gary Black, asked Musk if he could ever step down from his role as Tesla CEO. Musk said that because of all the great people in his organization, he thought Tesla would do well even if he was “abducted by aliens”.

He later stressed: “I don’t let it be clear”.

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