Elon Musk to tout robot Tesla cars

Elon Musk will unveil Tesla’s progress on driverless cars just days before expected bad news on earnings.

Tesla’s Model 3 during a press preview at the Seoul Motor Show. Pic: AFP

As Tesla faces questions about whether demand for the Model 3 compact car is slowing, chief executive Elon Musk wants investors to focus on the automaker’s road much farther ahead: vehicles driving themselves in a robot-taxi fleet.

Mr Musk is gathering investors tonight (AEST) to reveal the electric-car maker’s latest efforts to develop self-driving car technology and his strategy for deploying it. The presentation at its Palo Alto, California, headquarters is scheduled two days before Tesla reports quarterly financial results, which are expected to show a loss on slumping vehicle sales.

The week’s twin billing encapsulates the polarising nature of Tesla, which has sharply divided investors between sceptics and believers. Tonight’s event will likely showcase Mr Musk as the exuberant salesman pitching his futuristic vision for Tesla.

First-quarter results, on the other hand, are backward looking by definition and could prompt a defence of operational struggles.

Some investors praised Tesla’s decision to highlight its driverless-car technology because they think it is a reason to value Tesla more highly than other automakers. Those betting against the company said the investor day is a marketing stunt ahead of anticipated bad news.

“I’ve seen this movie before,” said David Kudla, CEO of Mainstay Capital Management, a short seller of Tesla stock. “Whether it’s launching the Tesla into space, whether it’s some sort of product reveal or some grand announcement that comes a day or two before earnings.”

Tesla declined to comment.

The investor presentation and earnings report come after Friday’s disclosure that Tesla is planning to shrink its board to seven from 11 directors as part of a series of moves designed to improve its corporate governance.

Since Tesla unveiled the Model 3 in March 2016 and received an unexpected deluge of $US1000 deposits for a car aimed at a more mainstream buyer, the company has sought to show it has the manufacturing muscle to meet customer demand.

After overcoming some production challenges for the model, Tesla now faces questions about whether it has reached a limit on buyers of a car that on average sold for $US57,000 last year, according to analyst estimates.

Tesla has already warned it would report a loss instead of a previously expected profit in the first quarter and said vehicle deliveries plummeted 31 per cent from three months earlier, citing challenges in delivering the Model 3 overseas for the first time. The company brought the car’s price down to the long-promised $US35,000 after the phase-out of US tax credits for buyers of electric cars.

Unlike major automakers, Tesla doesn’t disclose how many cars and sport-utility vehicles it sells. LMC Automotive, a vehicle-forecasting firm, estimates that Tesla’s US vehicle deliveries fell 57 per cent to 31,900 from the fourth quarter and that the company will sell 13 per cent fewer vehicles in the US this year compared with 2018.

“You’re probably levelling into a more natural area of the inevitable supply-and-demand balance,” said Jeff Schuster, an industry analyst with LMC Automotive.

Mr Musk has said he believes there is an annual demand for 500,000 Model 3s even as Americans prefer SUVs over sedans. “The demand for Model 3 is insanely high,” Mr Musk told investors last quarter before the most recent price cuts. “The inhibitor is affordability...It’s got nothing to do with desire.”

Tesla CEO Elon Musk with the new Tesla Model Y at its unveiling last month. Pic: AFP

At tonight’s driverless-car presentation -- slated to be live streamed and to include test rides for investors -- Mr Musk may try to stoke demand by showing off Tesla’s technological prowess while touting his ultimate promise: fleets of robot taxis.

Tesla investor ARK Investment believes a successful robot-taxi fleet could boost the company’s stock to $US4000 a share in 2023. On Friday, Tesla’s shares closed at $US273.26, down 18 per cent for the year.

When Tesla announced April 11 that it was offering 36-month lease financing for the Model 3, the company said customers wouldn’t be able to purchase the vehicles at the end of the term because the cars would be deployed in a robot fleet. Car companies normally allow a customer to buy the car or sell it used.

Mr Musk said the price of the so-called full self-driving feature on Tesla vehicles will increase “substantially over time” beginning on May 1.

He expects the fully self-driving system to be “feature complete” this year, meaning the vehicle will have the ability to drive to a destination without user intervention but will still require observation. The technology is improving so rapidly that it could be safe for a person in the driver’s seat to sleep in a moving vehicle by the end of 2020, Mr Musk has said. But he has also cautioned that much depends on regulatory approval, although it is unclear what approvals are necessary.

Legislation aiming to establish nationwide regulations has stalled in Congress, leaving states to create their own rules.

Tesla vehicles currently don’t have the ability to drive themselves. Its driver-assistance system, Autopilot, requires the driver to remain in control and monitors for hand movement on the steering wheel. Mr Musk has argued the system has improved safety, though Tesla has drawn scrutiny for its aggressive marketing and several crashes involving the system.

During an interview on YouTube with a Massachusetts Institute of Technology researcher earlier this month, Mr Musk said he expects vehicles with fully autonomous capabilities to have a value five to 10 times greater than that of other cars during the next decade.

“Buying a car today is an investment in the future,” Mr Musk said in the video. “If you buy a Tesla today, I believe, you’re buying an appreciating asset, not a depreciating asset.”

Wall Street Journal