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Karah Rucker

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Tesla cuts EV prices, spends $1 billion on a supercomputer

Jul 20, 2023

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Karah Rucker

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Tesla CEO Elon Musk is in a race to produce fully self-driving vehicles and he’s spending at least $1 billion to do it. Tesla is building an in-house supercomputer that will be used to process data and video to improve the EV maker’s autonomous driving capabilities. The goal of the computer, known as Project Dojo, is full autonomy. 

In an earnings call with analysts, Musk and other Tesla executives said they would be spending well over $1 billion on Project Dojo through the end of 2024 and that there was a “staggering” amount of training to be done. The figure was split between research, development and capital spending.

Last year, Musk said Tesla would be “worth basically zero” without achieving full self-driving capability. 

During the same earnings call, Musk said he would once again cut prices on electric vehicles, citing “turbulent times.” The company has slashed prices several times in the U.S., China and other markets since late last year. It has also increased discounts and incentives to reduce inventory. 

Musk said it made sense to sacrifice margins in order to make more vehicles. And even though price cutting continues to hurt the company’s gross margins in the second quarter, revenues are up nearly 50% year over year.

“One day it seems like the world economy is falling apart, next day it’s fine,” Musk said during the call. “I don’t know what the hell is going on. We’re in, I would call it, turbulent times.”

Tesla shares fell 5% after Musk’s comments. But Tesla’s stock received a big boost this year after some automakers including Ford Motor Co., General Motors, and EV charging firms said they would adopt Tesla’s charging technology. The company’s stock has risen 60% since the first deal back in May.

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KARAH RUCKER: A BILLION DOLLARS. THAT’S HOW MUCH ELON MUSK IS SPENDING ON A SUPERCOMPUTER TO WIN THE RACE IN SELF-DRIVING CARS. 

 

THE TESLA CEO IS BUILDING “PROJECT DOJO” – AN IN-HOUSE SUPERCOMPUTER THAT WILL BE USED TO PROCESS DATA AND VIDEO TO IMPROVE THE EV MAKER’S AUTONOMOUS DRIVING CAPABILITIES. 

THE GOAL OF THE COMPUTER IS FULL AUTONOMY. 

 

IN AN EARNINGS CALL WITH ANALYSTS, MUSK AND OTHER TESLA EXECUTIVES SAID THEY WOULD BE SPENDING WELL OVER ONE-BILLION DOLLARS ON PROJECT DOJO THROUGH THE END OF 2024.

THE FIGURE WAS SPLIT BETWEEN RESEARCH, DEVELOPMENT AND CAPITAL SPENDING. 

LAST YEAR, MUSK SAID TESLA – WHICH IS WORTH AROUND 900-BILLION – WOULD BE “WORTH BASICALLY ZERO” WITHOUT ACHIEVING FULL SELF-DRIVING CAPABILITY. 

 

DURING THE SAME CALL WITH ANALYSTS, MUSK SAID HE WOULD ONCE AGAIN CUT PRICES ON ELECTRIC VEHICLES —

A MOVE THAT HELPED THE COMPANY’S EARNINGS INCREASE BY 20 PERCENT LAST QUARTER.

BUT IT’S ALSO SOMETHING WORRYING INVESTORS —

AS MARGINS DIPPED.

EVEN THOUGH PRICE CUTTING CONTINUES TO HURT THE COMPANIES GROSS MARGINS, REVENUES ARE UP NEARLY 50% YEAR OVER YEAR. 

MUSK SAID IT MADE SENSE TO SACRIFICE MARGINS IN ORDER TO MAKE MORE VEHICLES. 

 

MUSK SAID QUOTE: “ONE DAY IT SEEMS LIKE THE WORLD ECONOMY IS FALLING APART, NEXT DAY IT’S FINE. I DON’T KNOW WHAT THE HELL IS GOING ON. WE’RE IN, I WOULD CALL IT, TURBULENT TIMES.”

 

TESLA SHARES FELL 5% AFTER MUSK’S COMMENTS. 

BUT TELSA’S STOCK RECEIVED A BIG BOOST THIS YEAR AFTER FORD, GM, AND OTHERS HAVE PLEDGED TO ADOPT ITS EV CHARGING TECHNOLOGY.

THE COMPANY’S STOCK HAS RISEN 60% SINCE THE FIRST DEAL BACK IN MAY.