Tesla’s Path to Growth: AI and Autonomous Vehicles Amidst Challenges

In the face of unfavorable financial results and a drop in profits, Tesla CEO Elon Musk addressed investors on Tuesday, seeking to assure them of the company’s long-term growth path. Musk highlighted the significance of artificial intelligence (AI) and autonomous vehicles in driving Tesla’s future success, stating, ‘We’re putting the actual ‘auto’ in ‘automobile,’ ‘ eliciting laughter from his executive team. Tesla CFO Vaibhav Taneja echoed this optimism, stating, ‘The future is really bright.’ However, Tesla’s current situation is not without challenges. Profits have declined by 55% compared to the same quarter last year due to decreased sales and price cuts. Several high-level executives have departed, including the head of investor relations, who announced their resignation during the earnings call. Tesla is also implementing layoffs, affecting more than 10% of its global workforce. Additionally, executives have been evasive when pressed for details about the long-promised $25,000 vehicle. Despite these challenges, Musk and other executives defended the company’s performance, citing broader industry headwinds, such as an arson attack at Tesla’s Berlin plant and the costs associated with launching the Cybertruck. They emphasized their belief in the bright future of electric vehicles. In 2020, Tesla executives presented a detailed plan outlining their strategy for creating a ‘compelling’ EV with a $25,000 price tag. ‘This has always been our dream from the beginning of the company,’ Musk said. This goal remains a top priority for investors and car buyers alike. Currently, the Model 3, Tesla’s most affordable vehicle, starts at around $38,000. Tesla’s initial plan involved casting a significant portion of the car as a single piece, similar to the manufacturing process of toy cars. Later, Tesla executives also suggested rethinking the entire assembly line process to facilitate the production of both this lower-priced mass-market vehicle and a custom-built robotaxi. However, Tesla has since confirmed reports that it is pivoting away from the mass-market portion of this plan. Nevertheless, Tesla maintains that ‘more affordable’ vehicles will still be offered before the second half of next year, utilizing existing manufacturing lines. The ‘revolutionary’ manufacturing process is now solely dedicated to the development of the robotaxi. The exact level of affordability remains unclear, as the company acknowledged during its investor presentation that the cost savings may be less than initially anticipated. When questioned about the timeline for the long-awaited $25,000 vehicle, executives repeatedly redirected attention towards the equally long-promised vision of robotaxis. ‘The way to think of Tesla is almost entirely as solving autonomy, and being able to turn on that autonomy for a giant fleet,’ Musk said in response to a query about the $25,000 car. ‘I think we’ve said all we will on that front,’ he told another questioner. For years, Musk has promised that an army of robotaxis, consisting of driverless Teslas picking up passengers, is imminent. On Tuesday, he reaffirmed this vision, announcing that Tesla will unveil the ‘Cybercab’ in August, a vehicle specifically designed for use as a taxi. Tesla envisions this as part of a fleet that could potentially include Teslas owned by individuals who rent them out to earn money, similar to the Airbnb model. Currently, Teslas equipped with a premium software add-on are capable of navigating city streets, obeying traffic signals, and making turns autonomously for the majority of the time. However, a vigilant driver is still required to occupy the front seat, ready to take control when necessary. Tesla has recently begun referring to this software as ‘Full Self-Driving (Supervised),’ acknowledging that it is not yet fully autonomous. Establishing a profitable robotaxi fleet involves more than just technological advancements; it requires productive collaboration with government regulators and fostering public trust, as demonstrated by the challenges faced by GM’s Cruise and Google’s Waymo. ‘I actually do not think there will be significant regulatory barriers, provided there is conclusive data that the autonomous car is safer than a human-driven car,’ Musk said, arguing that human drivers will become as obsolete as human elevator operators. Musk also outlined a plan to utilize idle Teslas as a distributed AI computing business, drawing parallels to Amazon Web Services’ cloud computing platform.

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