Technology · August 5, 2022

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

Tesla CEO Elon Musk gestures as he visits the construction site of Tesla’s Gigafactory in Grünheide near Berlin on August 13, 2021.

Patrick Pleul | Reuters

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

Musk joked that “macroeconomic forecasts are a recipe for disaster,” but still estimated that “we’re past the peak of inflation” and are likely to experience a “relatively mild recession” that will last about 18 months.

The CEO based his economic analysis on the commodity prices Tesla must pay for materials and goods it needs to manufacture electric vehicles.

“We get a pretty good look at how the prices of things have evolved over time because when you’re making millions of cars, you have to buy goods many months in advance when they’re needed,” he said.

In the second quarter of 2022, Russia’s war on Ukraine and the ongoing Covid pandemic in China hampered the Tesla factory in Shanghai, exacerbating supply chain snarls, parts shortages and labor problems across the auto industry.

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

Musk, who is also CEO of SpaceX, said he wouldn’t want to commit to Tesla stock buybacks just yet, and that a force majeure event could change the equation somewhere. However, he reiterated that if Tesla’s future cash flow looks solid and the world is “relatively stable,” a “stock buyback is on the table.”

20 million cars per year in about 12 factories by 2030

Overall, Tesla is aiming to produce 20 million vehicles annually by 2030, a lofty goal, and Musk said he thinks that will require about a dozen factories, with each factory producing 1.5 to 2 million units a year.

Currently, Tesla operates vehicle assembly plants in Shanghai; Fremont, California; Austin, Texas; and outside of Berlin in Germany. It also produces batteries at a facility in Sparks, Nevada, which it operates jointly with Panasonic.

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

At the same time, the Nevada company recycles just 50 vehicle battery packs a week, Musk announced Thursday, explaining that the number is so small because most Tesla car battery packs are still in use in vehicles today.

During the shareholder meeting, the prominent CEO also reiterated promises he’d made in the past, including that Tesla is moving closer to the goal of “solving autonomy” and delivering a self-driving vehicle that can operate as a robotaxi with no driver behind the wheel.

He delighted shareholders by soliciting their views on where Tesla’s next factory should be located (many shouted “Canada”) and told the room, which appeared to be full of retail investors, that they understand the company better than financial pundits, including Wall- Street Analysts.

But he also broke some disappointing news for shareholders, reiterating that Tesla is aiming to produce the Cybertruck by mid-2023 but cannot sell it with the same specs and prices originally quoted when the company unveiled the experimental pickup truck in 2019 .

Of the Cybertruck’s expected higher price, Musk said, “I don’t think there’s any way to predict the inflation that we’ve seen.” Tesla will be “installing the manufacturing equipment, tooling and everything” at its Austin facility “starting in the next few months.” , Texas, where the shareholders’ meeting was held on Thursday.

Musk boasted at the meeting that Tesla and his reusable rocket company SpaceX are two of the places engineering students would love to work in today. Tesla received three million applications last year, he said. He also revealed, “We allow people to move from one company to the other if they want to,” referring to his two companies. “That’s cool, we support that.”

Viewers of the in-person meeting were chosen through a random drawing while other shareholders tuned in to online video live streams. Attendees at the live event gave vocal jeers to shareholders who presented proposals that Tesla’s board of directors did not agree should be adopted.

One shareholder took the microphone during a question-and-answer session, giving up his right to ask Elon Musk a question and instead slamming the media for their treatment of Musk and thanking the CEO for “making the world one.” made a better place”. The shareholder also welcomed home his 6-year-old, who he said was watching the business event at home. He received a standing ovation.

Tesla bull and managing partner of The Future Fund, Gary Black, asked Musk if he would ever step down from his role as CEO at Tesla. Musk said that because of all the great people in his organization, he thought Tesla would do well even if he was “abducted by aliens.”

He later emphasized: “I’m not going to clarify that.”