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Musk outlines Tesla’s recession playbook: claw back costs

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Musk outlines Tesla's recession playbook: claw back costs

 Elon Musk has a playbook for Tesla (TSLA.O) headed into what he believes will be a “serious” recession: cut costs on everything from parts to logistics, while keeping the pressure on competitors with discounted sticker prices.

In a conference call to discuss Tesla s fourth-quarter results, Musk and other executives outlined plans to reshape the electric vehicle (EV) maker s cost base after slashing prices up to 20%, a move some analysts see as the first shot in a price war.

Part of the plan is expanding production at Tesla s newest plants in Berlin and Austin, Texas and increasing the company’s in-house production of batteries, since scale yields savings, executives said.

But Chief Financial Officer Zachary Kirkhorn said the company would also be “attacking every other area of cost and unwinding cost increases created for multiple years of COVID-related instability.”

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That would mean running Tesla factories leaner with fewer materials in inventory, cutting shipping and logistics costs and negotiating lower prices for components, he said – putting Tesla s suppliers on notice.

Among its suppliers, Tesla buys batteries from Japan s Panasonic (6752.T) and China s CATL (300750.SZ), and sources the massive presses it has used to take cost and complexity out of production from Italy s IDRA Group.

Tesla is also cutting costs by redesigning elements of battery and electric motor systems, removing features that owners are not using, based on data collected from Model 3 sedans and Model Y SUVs on the road, the company said.

Bill Russo, founder of China-based consultancy Automobility, said Tesla had already made gains on cost competitiveness by driving simplified hardware designs for its electric vehicles, taking a page from consumer electronics manufacturers.

“You can offset some of the margin hit from pricing with massive scale and simpler electronic architecture,” Russo said. “This is how they are trying to win the game.”

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Meanwhile the cost of lithium in EV batteries – the single most expensive component – will be higher in 2023 than last year, Kirkhorn said, a pressure that will hit Tesla s rivals that are still losing money on EVs harder.

“My guess is if the recession is a serious one, and I think it probably will be but I hope it isn t, that would lead to meaningful decrease in almost all of our input costs,” Musk said. “So we expect to see deflation in our input costs, which would likely then lead to, yes, better margin.”

Tesla said on Tuesday it would invest more than $3.6 billion to expand its Nevada factory complex and to increase the output of battery cells so that it could produce enough there to power 2 million vehicles annually.

Tesla forecast it would sell 1.8 million EVs this year, which would mean sales growth of about 37%. That annual number could be as high as 2 million vehicles barring an external shock, Musk said.
Shares of the company jumped 10%, with those of peers Lucid and Rivian Automotive (RIVN.O) also inching up more than 2.5%.
U.S. shares of Chinese EV makers also traded higher, with Nio Inc , Li Auto and Xpeng all up between 3.5% and 4.8% in Thursday morning trade.

Tesla made an average profit of almost $9,100 per vehicle sold in the fourth quarter, down 6% from a quarter earlier but still far more than established competitors. Tesla s third-quarter profit per car sold was more than seven times higher than Toyota Motor Corp (7203.T), for example.

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Tesla slashed prices by as much as 20% earlier this month, a move that broadened the range of its line-up that qualifies for tax credits of $7,500 per vehicle in the United States.

But analysts have focused on how well Tesla can sustain a core measure of profitability, the gross margin on auto sales, excluding credits.

Kirkhorn said Tesla expected to see that metric above 20% for 2023 with the average price of its vehicles above $47,000 even after discounts. By comparison, the average price of a new vehicle was just over $49,500 in the U.S. market in December, according to Kelley Blue Book.

Bringing costs down is also key to the next phase of Tesla s expansion, which Musk hinted the company would detail at its investor day in March: plans for an affordable EV that analysts have expected to be priced below $35,000.

“While competition in the EV space continues to heat up, Tesla s focus on electrical efficiency and investment in battery technology likely makes them tough to chase in the short-term,” said analysts at Cowen and Company.

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Tesla is also planning to roll out a revamped version of the Model 3 sedan later this year code-named “Highland” with a focus in part on reduced production cost, Reuters has reported.

The company s average cost per vehicle, including all categories of its spending, was almost $44,000 in the fourth quarter.
“Price really matters. I think there s just a vast number of 

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Amazon’s AWS appeals to corporate customers with new chatbot, AI safety measures

Amazon’s AWS appeals to corporate customers with new chatbot, AI safety measures

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Amazon's AWS appeals to corporate customers with new chatbot, AI safety measures

Amazon (AMZN.O) is trying to lure big corporate customers to it AWS cloud computing service with a new chatbot for businesses, and by offering to guard them against legal and reputational damage that can come from the output of artificial intelligence.

The new chatbot, called Q, is designed to help with productivity by helping workers summarize important documents and support tickets and chat via communication apps such as Slack, the company announced at its annual cloud computing conference Tuesday in Las Vegas. The software can also automatically make changes to businesses source code, speeding development, the company said.

The new software arrives roughly a year after OpenAI’s ChatGPT burst onto the scene, setting off a frenzy of investment in generative AI startups. Alphabet (GOOGL.O) and others have announced their own chatbots, which can have human-like conversations with users to help with daily tasks.

AWS CEO Adam Selipsky, at Amazon’s annual cloud computing conference in Las Vegas, announced a new safeguard against objectionable content on generative AI applications, called Guardrails for Bedrock. The service allows users to filter out harmful content, he said.

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Because generative AI is trained on publicly available content, offensive words or other objectionable content can slip through into results from users’ prompts. That is particularly problematic for younger users, in times of global conflict or during elections when generative AI’s output in search results can influence opinion.

Safety advocates have cautioned that generative AI could operate out of the control of its human creators and pump out increasingly dangerous content or operate entire systems without oversight. In particular, they worry about the software putting influential – and convincing – content on social media sites like X and Facebook (META.O).

Selipsky said the new service was important for customers to put limits they see fit on the generative AI they use.

“For example, a bank could configure an online assistant to refrain from providing investment advice,” said Selipsky. “Or, to prevent inappropriate content, an e-commerce site could ensure that its online assistant doesn’t use hate speech or insults.”

As part of its appeal to corporations, Amazon said the Q chatbot will offer businesses limits so that it can keep sensitive data from employees who should not have access to it. Pricing will start at $20 per user, per year.

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Also at the conference, Amazon announced it would indemnify its customers against lawsuits based on the misuse of copyrighted materials. Stock photography company Getty Images, for instance, sued Stability AI earlier this year, alleging it scraped its website for images without permission.

Guardrails for Bedrock is in limited preview today, Amazon said. The Seattle company did not provide additional details about its indemnification policy. 

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TikTok obtaining Indonesia e-commerce permit

TikTok obtaining Indonesia e-commerce permit

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TikTok obtaining Indonesia e-commerce permit

Short video app TikTok is in the process of obtaining an e-commerce permit from Indonesia’s government, state news agency Antara reported, citing the deputy trade minister.

In September, Indonesia banned e-commerce transactions on social media, a major blow for TikTok, which had pledged to invest billions of dollars in Southeast Asia, including Indonesia, the region’s biggest economy.

“Before, they (TikTok) were not compliant, they didn’t have the permit. Now they are taking care of it,” deputy trade minister Jerry Sambuaga was quoted saying by Antara on Tuesday.

He said a partnership with a local firm could be done providing it was in accordance with regulations.

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TikTok, owned by China’s ByteDance, has 125 million active monthly users in Indonesia, a country of more than 270 million people. It has been looking to translate the large user base into a major e-commerce revenue source.

TikTok did not immediately respond to request for comment regarding the deputy minister’s remarks.

Reuters reported earlier this month that TikTok was in talks on possible partnerships with several Indonesian e-commerce companies, including GoTo’s e-commerce unit (GOTO.JK) Tokopedia, Bukalapak.com (BUKA.JK) and Blibli (BELI.JK). 

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Japan space agency hit with cyberattack, rocket and satellite info not accessed

Japan space agency hit with cyberattack, rocket and satellite info not accessed

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Japan space agency hit with cyberattack, rocket and satellite info not accessed

Japan’s space agency was hit with a cyberattack but the information the hackers accessed did not include anything important for rocket and satellite operations, a spokesperson said on Wednesday.

“There was a possibility of unauthorised access by exploiting the vulnerability of network equipment,” the spokesperson at Japan Aerospace Exploration Agency (JAXA) said, declining to elaborate on details such as when the attack took place.

The space agency learned of the possibility of the unauthorised access after receiving information from an external organisation and conducting an internal investigation, the spokesperson said, declining to identify the organisation’s name.

The investigation is ongoing, the spokesperson said.

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Japanese media reported Wednesday that the cyberattack occurred during the summer and the police became aware of the attack and notified JAXA this autumn. The Yomiuri newspaper first reported the incident. 

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