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Cybertrucks, new factories in focus as Tesla set to report record earnings

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Tesla Inc is expected to post record revenue on Wednesday, but analysts and investors are focusing on how fast Tesla can scale up production at two new factories this year with technology changes as well as battery and other supply chain constraints clouding the outlook.

Chief Executive Officer Elon Musk promises an updated product roadmap on Wednesday, with eyes on the time frames for the launch of Cybertruck and a hoped-for $25,000 electric car.

“I would not be surprised if Tesla has some significant manufacturing challenges, producing the new vehicle structures and new batteries in high volumes,” Guidehouse Insights analyst Sam Abuelsamid, said.

Tesla has weathered the global supply chain crisis better than other automakers, producing a record number of vehicles and revenue is expected to rise 52% in the fourth quarter to $16.4 billion, according to Refinitiv data.

Automotive gross margin excluding regulatory credits are expected to be flat or up slightly from the previous quarter, despite an inflationary environment which has a negative impact on component costs, said Gene Munster, managing partner at venture capital firm Loup Ventures.

NEW FACTORIES

Analysts said Tesla’s two new factories in Texas and Berlin eventually could double Tesla’s production capacity, but it is not clear whether Tesla started production.

Musk said new factories will use manufacturing technology such as casting the body in only two or more pieces and integrating next-generation batteries into the vehicle body.

While the new technologies would help cut the number of vehicle parts, thus reducing manufacturing complexity and bringing down costs, they could be “significant production risk,” Musk said in 2020.

In addition, investors will want to hear about the outlook for the supply chain, with automakers straining to meet demand for electric vehicles.

4680 BATTERIES

Tesla expected the first vehicles equipped with its own 4680 battery which could give cars more range and bring down their costs, to be delivered early this year, but it is not clear when it would be able to mass produce the batteries.

Tesla’s major battery supplier Panasonic will begin producing its new batteries for Tesla from as early as 2023 in Japan, the Nikkei reported on Monday. LG Energy Solution also aimed for 2023 production of the 4680 cells, Reuters reported last year.

CYBERTRUCK

In 2019, Musk unveiled Tesla’s futuristic electric pickup trucks, aiming to gain a foothold in the popular and profitable segment in the U.S. market.

Musk, who has often missed his self-imposed launch targets, has already delayed Cybertruck production from late 2021 to late 2022. A source told Reuters that Tesla aims to start initial production of the much-anticipated model in early 2023, saying they are making changes to features and functionalities from its original version.

“This is the first time that Tesla has brought a vehicle out with serious competition,” said Sam Fiorani, vice president at AutoForecast Solutions, referring to Ford and Rivian, which are planning to ramp up production.

As it is very hard to crack into the U.S. truck market – the home turf of American “Big Three” automakers, Tesla is likely to go after “weekend warriors or lifestyle buyers” rather than traditional commercial buyers, he said.

$25,000 ELECTRIC CARS

Musk in 2020 promised that in three years Tesla would offer a $25,000 electric car that can drive itself.

Tesla vice president Lars Moravy said in October that the company would not add new vehicles while battery cells were constrained, and that production of its existing models would take priority.

“Longer term investors care about Model 2,” Munster said with the current vehicle pricing, Tesla would not be able to grow volume by 50% every year.

 

(Reporting by Hyunjoo Jin in San Francisco, additional reporting by Akash Sriram in Bangalore; editing by Peter Henderson and Bernard Orr)

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Netflix’s subscriber growth slows as gains from password-sharing crackdown subside

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Netflix on Thursday reported that its subscriber growth slowed dramatically during the summer, a sign the huge gains from the video-streaming service’s crackdown on freeloading viewers is tapering off.

The 5.1 million subscribers that Netflix added during the July-September period represented a 42% decline from the total gained during the same time last year. Even so, the company’s revenue and profit rose at a faster pace than analysts had projected, according to FactSet Research.

Netflix ended September with 282.7 million worldwide subscribers — far more than any other streaming service.

The Los Gatos, California, company earned $2.36 billion, or $5.40 per share, a 41% increase from the same time last year. Revenue climbed 15% from a year ago to $9.82 billion. Netflix management predicted the company’s revenue will rise at the same 15% year-over-year pace during the October-December period, slightly than better than analysts have been expecting.

The strong financial performance in the past quarter coupled with the upbeat forecast eclipsed any worries about slowing subscriber growth. Netflix’s stock price surged nearly 4% in extended trading after the numbers came out, building upon a more than 40% increase in the company’s shares so far this year.

The past quarter’s subscriber gains were the lowest posted in any three-month period since the beginning of last year. That drop-off indicates Netflix is shifting to a new phase after reaping the benefits from a ban on the once-rampant practice of sharing account passwords that enabled an estimated 100 million people watch its popular service without paying for it.

The crackdown, triggered by a rare loss of subscribers coming out of the pandemic in 2022, helped Netflix add 57 million subscribers from June 2022 through this June — an average of more than 7 million per quarter, while many of its industry rivals have been struggling as households curbed their discretionary spending.

Netflix’s gains also were propelled by a low-priced version of its service that included commercials for the first time in its history. The company still is only getting a small fraction of its revenue from the 2-year-old advertising push, but Netflix is intensifying its focus on that segment of its business to help boost its profits.

In a letter to shareholder, Netflix reiterated previous cautionary notes about its expansion into advertising, though the low-priced option including commercials has become its fastest growing segment.

“We have much more work to do improving our offering for advertisers, which will be a priority over the next few years,” Netflix management wrote in the letter.

As part of its evolution, Netflix has been increasingly supplementing its lineup of scripted TV series and movies with live programming, such as a Labor Day spectacle featuring renowned glutton Joey Chestnut setting a world record for gorging on hot dogs in a showdown with his longtime nemesis Takeru Kobayashi.

Netflix will be trying to attract more viewer during the current quarter with a Nov. 15 fight pitting former heavyweight champion Mike Tyson against Jake Paul, a YouTube sensation turned boxer, and two National Football League games on Christmas Day.

The Canadian Press. All rights reserved.

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