By Chris Kirkham and Akash Sriram
Los Angeles — Tesla plans to more than double capital spending to a record high of more than $20bn this year, but little of it will go to its traditional business of selling electric vehicles (EVs) to human drivers.
The company, which last year lost its global EV sales crown to China’s BYD, is instead shifting investment to yet-unproven business lines such as fully autonomous vehicles and humanoid robots, based on executive comments on Wednesday’s earnings call.
Highlighting the change, CEO Elon Musk said Tesla will end production of its Model X SUV and Model S sedans and instead use the space in its California factory to make humanoid robots.
“This is going to be a very big capex year,” he said. “We’re making big investments for an epic future.”
Most of the record investment will be spent on production lines for the Cybercab, a fully autonomous vehicle without a steering wheel and pedals, as well as the long-promised Tesla semi-truck, Optimus robots, and plants for battery and lithium production, said CFO Vaibhav Taneja.
Tesla is still reliant on human-driven EVs for most of its sales but its valuation far exceeds any other carmaker, putting it more in a league with major tech companies. Much of that value hangs on investors’ beliefs that Musk will deliver on lofty promises of robotaxis and humanoid robots backed by the company’s investment in AI.
Tesla joins Facebook parent Meta Platforms, Microsoft and Alphabet in planning sharp increases in capital spending this year, as those companies invest heavily in hardware and data centres to support AI model training and customer demand.
Tesla shares were up 1.8% at the start of trade in New York on Thursday.
Scott Acheychek, the COO of Rex Financial, which manages exchange traded funds (ETFs) with exposure to Tesla stock, argued that Tesla’s car business is no longer the main focus. “The bigger story is the business model transition now under way” as Tesla focuses on autonomous driving.
‘Necessary spending’
Andrew Rocco, stock strategist at Zacks Investment Research, said he views the $20bn as “necessary spending”.
“If Optimus is going to be a best-selling product, the AI must be trained as well as possible,” he said, adding the planned spending gives him confidence that Musk’s “sometimes loose timelines will actually be honoured”.
The $20bn is more than double the $8.5bn in capital spending last year and significantly above the then-record of $11.3bn in 2024.
Taneja said on the call that Tesla has more than $44bn in cash and investments on the books that it can use to fund the investments. He signalled this year is not likely to be the end of increased spending, adding the company could look to pay for the investments “through more debt or other means”.
Musk said Tesla is embarking on some of the spending projects not for fun but rather “out of desperation”.
“Can other people, please, for the love of God, in the name of all that is holy, can others please build this stuff?” Musk said, referring to spending on cathode and lithium refining. “It’s very hard to build these things.”
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