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Tesla's massive recall of more than 1.8 million electric vehicles has attracted industry attention.

According to CCTV Finance on July 31, the National Highway Traffic Safety Administration (NHTSA) said that Tesla will recall more than 1.8 million electric vehicles in the United States because the software cannot detect an unlocked hood. The agency believes that this software defect may cause the unlocked hood to suddenly open while driving and block the driver's view, thereby increasing the risk of a crash.

The report pointed out that the recall involves Model 3, Model S, Model X produced from 2021 to 2024, and Model Y models produced from 2020 to 2024, affecting 1.8496 million vehicles.

Obviously, Musk's attention may have shifted to FSD (autonomous driving technology). Tesla has always been a benchmark company for new energy electric vehicles. Musk's self-confidence and self-consistency are two sides of the same coin. As a result, Tesla has shown a market performance with huge peaks and troughs.

After the semi-annual report was released on July 23, Tesla's stock price fell by more than 8% during the trading session due to a sharp decline in net profit.

Although Musk kept throwing out new things in the conference call, saying that in the long run, the market value of automated transportation will reach $5 trillion or even more, or more bluntly emphasized, "If you don't believe (Tesla's autopilot), sell the stock."

However, judging from its current performance, Tesla has not yet returned to the stage where investors can cast their votes of confidence. As of press time, Tesla's stock price is $223.03 per share, with a total market value of $712.508 billion.

It is undeniable that Tesla has grown rapidly in the past 10 years. Its revenue has increased by more than 29 times, with a compound annual growth rate of 41%; its EBITDA has increased by nearly 300 times, with a compound annual growth rate of an even more astonishing 77%.

On the other side of the coin, the revenue of Tesla's automobile business, which it was originally proud of, has declined rapidly. When the second growth curve, autonomous driving, has not yet grown to the point where it can be self-sustaining, this performance is a dangerous signal. After smelling the danger, what will Tesla do?

From new energy vehicle companies to "autonomous driving concept stocks"

According to the second quarter report, Tesla's current new energy vehicle business is still the mainstay of revenue. In the second quarter of this year, Tesla delivered a total of 440,000 vehicles, a month-on-month increase of 14.7%, generating revenue of US$19.9 billion, accounting for 78% of the total revenue.

For the entire first half of the year, Tesla's revenue was US$46.8 billion, of which more than US$37.2 billion was contributed by its automotive business, accounting for nearly 80%.

The second quarter report also shows that among all businesses, the fastest growing is the energy storage business. In the second quarter alone, Tesla deployed 9.4GWh of energy storage products, more than double its previous largest quarterly deployment, a year-on-year increase of 157%, which is also Tesla's latest record for single-quarter installations so far.

From January to June 2024, the installed capacity of Tesla's energy storage products was 13.45 GWh, contributing revenue of US$4.65 billion. The revenue in the second quarter reached US$3.014 billion, a year-on-year increase of 100%.

The second quarter report shows thatThe automotive business contributed the most, and the energy storage business had the most gratifying growth, but in Musk's blueprint, Tesla's future seems to be linked to autonomous driving.

On the one hand, it may be because the revenue of the automotive business is declining. By the second quarter, Tesla's revenue from the automotive business showed a significant decline compared with the same period last year.

The financial report shows that Tesla's revenue from automobile sales business during the reporting period was US$18.53 billion, and US$20.419 billion in the same period of 2023. The revenue from car rental business also fell from US$567 million to US$458 million.

Tesla's situation revealed in the second quarter report can be summarized in five words: increased revenue but not increased profits. Tesla's revenue from April to June increased slightly by 2% year-on-year to $25.5 billion. At the same time, net profit attributable to ordinary shareholders fell 45%, from $2.703 billion in Q2 last year to $1.478 billion this year.

The revenue growth and the sharp drop in profits reveal that Tesla's internal management problems are constantly exposed. The future of commercial companies needs to be supplemented by new growth engines, which may be another reason why Musk has paid special attention to FSD recently.

In fact, judging from the attention paid to autonomous driving, the global capital market is not uninterested, but too interested. After all, selling cars is a physical business, and there are economies of scale, but the growth is ultimately limited, while selling software is a highly profitable business. Musk has previously revealed that Tesla FSD's gross profit margin can reach more than 90%.

Dan Ives, a well-known strategist at the US investment bank Wedbush, also pointed out in a previous report that whether Tesla's future valuation can reach $1 trillion or even higher depends on how Musk interprets the story of artificial intelligence and how Tesla's proud autonomous driving can achieve commercial transformation and monetization.

However, judging from its actual performance, Tesla may not be ready yet.

There was still not much said about the new car during the conference call. Apart from the known use of both new and old production capacity, there was no new information. Musk dropped a bombshell news that FSD will enter the Chinese and European markets within the year. Will investors who now value certainty so much wait patiently for half a year?

Autonomous driving still needs to look to the East

According to an article in The Paper titled "Musk confirms Tesla Robotaxi release delayed as it will take more time for some design changes," another piece of news that made investors nervous at Tesla's conference call was that the Robotaxi (driverless taxi) originally scheduled to be released in August has been postponed to October 10 this year, and is scheduled to be put into use by the end of this year or next year at the latest.

According to Musk, the delay was due to some design changes to the front of the robotaxi, and he added that the extra time was needed "to allow us to show other things."

But this is not the first time Robotaxi has been delayed.

According to an article published by The Economist on July 25, as early as April 2019, Musk said in a conference call with institutional investors that Tesla plans to have 1 million self-driving taxis by 2020. In April 2022, Tesla announced that the mass production plan of Robotaxi would be postponed to 2024.

Time has come to the present in the blink of an eye. In April, Musk announced at X that Tesla would launch Robotaxi to the world on August 8. Two days later, Tesla followed suit and stated that it had invested more than $1 million in the field of autonomous driving this year.

Five years have passed since 2019, and now we know that Tesla's plan for one million self-driving taxis may remain at the starting point.

Just two months ago, Tesla expressed its hope to test Robotaxi in China, which was also when Baidu's Carrot Run was put into use and attracted the first wave of attention on the Internet.

According to offline passenger feedback, for the same 10km distance, the fare of Luobo Kuaipao is 4 to 16 yuan, while the fare of ordinary online ride-hailing cars is 18 or even 30 yuan. This is certainly due to the subsidies provided by Baidu to Luobo Kuaipao, but in fact, it is also because Luobo Kuaipao, with its autonomous driving technology, has brought a dimensionality reduction attack to the taxi and online ride-hailing market with its advantages of convenience, speed and low price.

Not only did some controversies not make people lose interest in Turnip Run, but netizens in more cities began to call for, "Let me help everyone enjoy Turnip Run first."

As one of the earliest companies in China to invest in AI research, Baidu has made rapid progress in driverless cars.

According to the 2023 financial report, last year, Turnip Run received more than 3 million orders for driverless cars, and in the fourth quarter, the number of fully driverless orders accounted for nearly 50% of Wuhan's total orders. In mid-May, Robin Li mentioned that in the years since Turnip Run was launched, the total number of service orders in all cities has exceeded 6 million.

Another company also engaged in autonomous driving, WeRide, has already progressed to the stage of listing.

On July 26, WeRide submitted a prospectus to the U.S. Securities and Exchange Commission. The prospectus showed that its revenue from services grew very rapidly, reaching 37 million yuan, 190 million yuan and 348 million yuan in the past three years.

This means that WeRide's commercialization is on the right track. At present, its high-end bracket solution has been put into mass production on Chery Xingjiyuan ET and ES. According to feedback from industry insiders, although the Xingjiyuan series has not yet reached the national pilot level, it has achieved relatively ideal results.

As one of Tesla's strongest competitors, the success of Luobo Kuaipao and WeRide is essentially the success of the Chinese automobile market.

Autonomous driving requires a large amount of measured data and strong scientific and technological research and development capabilities. As for the former, China has a unique advantage in terms of diverse road conditions and a large number of drivers cultivated in its vast land.

As for the latter, under the premise that China is working together to promote the development of the new energy vehicle industry chain, funds, technology and talents are gradually improved and formed advantages.

It is conceivable that as time goes by, the "huge gap" imagined by Tesla will no longer exist, and it is not impossible for Chinese companies to overtake.

How does Tesla play its three trump cards?

Over the past year and a half, Tesla's operating profit margin has continued to decline, from 17.2% to 5.5%.

In this year's second quarter financial report, Tesla revealed that the company's automobile gross profit margin has dropped to 13.9%, and the gross profit for each car sold is estimated to be US$5,784. Two years ago, this figure was US$13,809.

What distinguishes Tesla from other traditional car companies is its software subscription business. This low-cost, high-revenue part of the business gives it more room to play. Some people point out that this makes Tesla more and more like Apple, but this does not change Tesla's nature as a capital-intensive company.

Looking at the entire automotive manufacturing industry chain, each link of production, sales and storage has high costs. In the field of new energy vehicles, purchasing new equipment, adding new production lines, developing larger battery capacity, laying more charging points, etc. are both the key to achieving growth in the later business and a large expense that pulls profits. These are all additional costs.

Musk once estimated Tesla's capital expenditure in 2024 to be more than $10 billion. He also said that capital expenditures in the next two fiscal years will reach at least $8 billion, which is a 5.5-fold increase compared to Tesla five years ago.

As a business-centric listed company, Tesla is bound to be responsible for its own profits. It must be seen that despite the current pessimistic voices in the capital market, Tesla is not a company lacking strength.

On the contrary, it does have its unique advantages and the ability to convert them into currency. The main contradiction now is that Tesla cannot surpass its past self and cannot maintain this unexpected strength, so it is bound to usher in a process of valuation regression.

Those who are bearish on Tesla in the short term and those who are bullish on Tesla in the long term both have their reasons. For Tesla, what is important is not the voice of the capital market, but the three levers that consolidate its foundation: AI, robotics and energy storage business.

Musk mentioned at the shareholders' meeting that humanoid robots may become a turning point in Tesla's growth. Tesla's latest second-generation humanoid robots have lighter weight and more flexible body control capabilities with the support of AI large models.

By next year, Tesla plans to officially produce humanoid robots. Regardless of their commercialization capabilities, the top AI technology, efficient computing power and excellent craftsmanship behind them are a great corporate publicity opportunity for Tesla itself.

The development prospects of the energy storage business are similar. An analysis report recently released by Morgan Stanley analyst Adam Jonas shows that the electricity demand brought about by the AI ​​boom will make Tesla a key player in the US energy market. Benefiting from the rapid growth of this part, Tesla's revenue from energy storage in fiscal 2024 is expected to exceed US$7 billion, and its profit margin will also be higher than Tesla's automotive business.

As a leading company in the new energy industry, it is normal for Tesla to have ups and downs.

An executive of a state-owned automobile group once said that Chinese new energy vehicle companies should not only learn from Tesla's technological research and development capabilities, but also learn from Tesla's grasp of economies of scale and strict control of costs in order to achieve high levels of revenue.

The affirmation from industry insiders is enough to prove Tesla's long-term potential. The short-term darkness will not defeat Tesla, and it will only be greeted by a longer journey.

Judging from the consensus reached at the Third Plenary Session of the 20th CPC Central Committee, continuing to promote ecological priority, conservation and intensive use, green and low-carbon development is an inevitable process for China's modernization, and new energy companies play a vital role in this. Perhaps it is the policy protection that allows Musk to always be confident.

In any case, the stage has been set, and what Tesla needs to do is to adjust itself as soon as possible and find more possibilities for subsequent development in this wave of trends. To become a company that keeps up with the times and meets the needs of development, there is still a long way to go.

Author | You Li