Elon Musk predicts mild 18-month recession and teases stock buybacks

Tesla CEO Elon Musk gestures while visiting the Tesla Gigafactory construction site in Grünheide near Berlin, Germany, August 13, 2021.

Patrick Plus | Reuters

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

Musk joked that “making macroeconomic forecasts is a direct recipe for disaster,” but nevertheless calculated that “we are past the peak of inflation” and are likely to see a “relatively mild recession” that will last about 18 months.

The CEO based his economic analysis on the prices of goods that Tesla is asking to pay for the materials and goods needed to make electric vehicles.

“We get some idea of ​​how the prices of things change over time, because when you make millions of cars, you have to buy goods many months before they are needed,” he said.

in second quarter 2022Russia’s war with Ukraine and the ongoing Covid pandemic in China have hampered Tesla’s Shanghai plant and exacerbated supply chain problems, parts shortages and labor problems throughout the auto industry.

Musk was also asked how Tesla plans to use its capital in the coming years. The CEO said that Tesla will first increase its capital and research and development spending “as fast as we can without wasting time.” He added that “a sort of share buyback is possible” depending on what Tesla’s future cash flow looks like.

Musk, who is also the CEO of SpaceX, said he “didn’t want to be committed” to a Tesla stock buyback “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 “stock buybacks are on the table.”

20 million vehicles per year in about 12 factories by 2030

Overall, Tesla aims to produce 20 million vehicles annually by 2030, and Musk said he believes it would require about a dozen factories, each producing 1.5 million to 2 million vehicles a year.

Tesla currently operates car assembly plants in Shanghai; Fremont, California; Austin, Texas; and outside of Berlin in Germany. It also manufactures batteries at a plant in Sparks, Nevada, which is operated in conjunction with Panasonic.

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

At the same time, the company only recycles 50 car batteries a week in Nevada, Musk said on Thursday, explaining that the number is so low because most Tesla car batteries are still used in vehicles.

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During the shareholder meeting, the famed CEO also reiterated promises he has made in the past, including that Tesla is moving closer to the goal of an “autonomy solution” and delivering an unmanned vehicle capable of operating as a robotic taxi without any driver behind the wheel. wheel.

He delighted shareholders by asking for their opinion on where to build Tesla’s next plant (many shouted “Canada”) and telling an audience seemingly full of retail investors that they understand the company better than financial professionals, including Wall analysts. -straight.

But he also delivered some disappointing news to shareholders, reiterating that Tesla intends to release the Cybertruck in mid-2023 but will not be able to sell it with the same specs and price as it was originally quoted when the company introduced the experimental pickup truck in 2019. .

Musk said of the Cybertruck’s expected higher price, “I think it was impossible to foresee the kind of inflation that we saw.” Tesla will be “installing production equipment, tools and everything starting in the next few months” at its plant in Austin, Texas, where a shareholder meeting was held on Thursday.

3 million job applications

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

Audience members in a face-to-face meeting were selected through a random drawing, while others tuned in for an online video feed. Attendees of the live event raucously mocked the shareholders who submitted proposals that the Tesla board of directors did not agree to accept.

One shareholder took the microphone during the Q&A session, declined the opportunity to ask Elon Musk a question, instead criticizing the media for how they treat Musk and thanking the CEO for “making the world a better place.” The shareholder also greeted his 6-year-old son, who he said was watching a business event at home. He received a standing ovation.

Tesla bull and The Future Fund managing partner Gary Black asked Musk if he could ever leave his position as CEO of Tesla. Musk said that thanks to all the great people in his organization, he thought Tesla would succeed even if he was “abducted by aliens.”

He later stressed, “I’m not leaving to make things clear.”