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

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

Musk joked that “macro forecasting is a recipe for disaster”, but nonetheless felt that “we are past the peak of inflation” and will likely see a “relatively mild recession”, of a duration of approximately 18 months.

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

“We have a good idea of ​​how the prices of things change over time, because when you’re making millions of cars, you have to buy products months before they’re needed,” he said. .

In the second quarter of 2022, Russia’s war on Ukraine and the ongoing Covid pandemic in China hampered Tesla’s Shanghai factory and compounded supply chain issues, parts shortages and labor issues in the automotive industry.

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

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

Overall, Tesla aims to produce 20 million vehicles per year by 2030, an ambitious goal, and Musk said he thinks it will take around a dozen factories, with each factory producing 1.5 to 2 million units per year.

Currently, Tesla operates vehicle assembly plants in Shanghai; Fremont, California; Austin, TX; and outside of Berlin in Germany. It also produces batteries at a plant 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.

Meanwhile, the company only recycles 50 vehicle batteries per week in Nevada, Musk revealed Thursday, explaining that the number is so low because most batteries from Tesla cars are still used in vehicles today.

At the shareholder meeting, the famed CEO also reiterated promises he’s made in the past, including that Tesla is moving closer to the goal of ‘solving autonomy’ and delivering an autonomous vehicle that can work. like a robotaxi without any driver behind the wheel.

He delighted shareholders by asking for their input on where to set up Tesla’s next factory (many shouted “Canada”) and telling the room seemingly full of retail investors that they understood the company better than finance professionals, including Wall Street analysts.

But he also delivered some disappointing news to shareholders, reiterating that Tesla is aiming to produce the Cybertruck in mid-2023 but won’t be able to sell it with the same specs and price it was originally quoted when the company unveiled the pick-up. -up experimental in 2019. .

Of the Cybertruck’s projected higher price, Musk said, “I think there’s no way we’ve anticipated all the inflation we’ve seen.” Tesla will “install production equipment, tooling and everything, starting in the next few months” at its plant in Austin, Texas, where the shareholder meeting was held on Thursday.

Musk boasted at the meeting that Tesla and his reusable rocket company SpaceX are two of the places where engineering students most want to work today. Tesla received 3 million job applications last year, he said. He also revealed, “We allow people to switch between companies if they want to,” referring to his two companies. “It’s cool, we support that.”

Members of the public attending the in-person meeting were selected by lottery, while other shareholders listened to live video streams online. Attendees of the live event launched raucous taunts at shareholders who put forward proposals that Tesla’s board did not agree to pass.

A shareholder took the mic during a Q&A, waived his right to ask Elon Musk a question and instead slammed the media for their treatment of Musk and thanked the CEO for ‘making the world a better place’ “. The shareholder also said hello to his 6-year-old at home 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 might ever step down as CEO of Tesla. Musk said that because of all the great people in his organization, he thought Tesla would do well even if he was “kidnapped by aliens.”

He then emphasized, “I’m not leaving to be clear.”