Tesla CEO Elon Musk had lots to say at the company's recent 2023 Annual Shareholder Meeting, which seems to have come off in a more positive light than some may have expected. The CEO not only talked about Tesla's margins, but also provided estimates about what to expect for them in the future.
Tesla has been known to have excellent margins for some time now, and that's not an easy task in the auto industry. It's actually one of the main reasons the US EV maker has been able to cut prices so drastically and so many times this year. Even after all the price cuts, Tesla is still showing good margins and earnings. Sure, they could be better, but a decision had to be made between appealing to a broader customer base and increasing sales or making more money per car.
At any rate, Musk addressed margins for both Tesla's automotive division and its Energy division. He also added a look at what the margins for the EVs could potentially peak at once (if) Tesla reaches full autonomy with its Full Self-Driving (FSD) capability package. Keep in mind, while we know the textbook definition of fully autonomous, it's still not so clear what Musk sees as "reaching full autonomy."
When asked to estimate "peak" margins for the automotive and energy segments of the company, Musk first replied with the following, but not after making it clear that a lot of speculation was required, and it was only going to be an estimate:
“…obviously if you’ve got a car that costs the same and has, say—I don’t know—a 20 or 25% margin, and suddenly is able to be used five times as much then you might have 80% margins and the revenue would increase several folds. That’s why I say it’s probably going to be the biggest asset value step change in [the] history of Earth.”
As far as Tesla Energy is concerned, Musk estimates the margins to peak around 20 to 25%. He did add that they had the potential to go up to about 30%. These estimated numbers would also make sense for Tesla's EVs as a whole.
The 80% peak margin was referring to Tesla's EV business with full autonomy factored in. Musk puts a whole lot of weight on what Tesla is doing with automated driving features, since no one is going about it in quite the same way. Tesla is using only cameras as a vision-based system, but then complementing it with neural networks and artificial intelligence (AI).
Many experts will tell you it's not going to work, but many experts have said such things about most of Musk's crazy plans in the past, like landing and reusing rockets, digging large tunnels under major cities, or making long-range EVs mainstream cars that outsell gas cars.
Tesla and Musk have been touting the company's FSD and robotaxi fleet for years, and as with most things, they're years and years behind. However, the CEO still believes the best is yet to come and that it will make a Tesla worth way more than owning most other cars.
As we always say, we'll have to wait, and wait and wait and wait and wait, to see how it all pans out. Hopefully, in a few years, we'll be looking back at this article stunned that cars really can drive themselves. We shall see.
