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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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China launches Shenzhou-16 mission to Chinese space station

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China launches Shenzhou-16 mission to Chinese space station

 China sent three astronauts to its now fully operational space station as part of crew rotation on Tuesday in the fifth manned mission to the Chinese space outpost since 2021, state media reported.

The spacecraft, Shenzhou-16, or “Divine Vessel”, and its three passengers lifted off atop a Long March-2F rocket from the Jiuquan Satellite Launch Centre in the Gobi Desert in northwest China at 9:31 a.m. (0131 GMT).

The astronauts on Shenzhou-16 will replace the three-member crew of the Shenzhou-15, who arrived at the space station late in November.

The station, comprising three modules, was completed at the end of last year after 11 crewed and uncrewed missions since April 2021, beginning with the launch of the first and biggest module – the station’s main living quarters.

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China has already announced plans to expand its permanently inhabited space outpost, with the next module slated to dock with the current T-shaped space station to create a cross-shaped structure.

Leading the Shenzhou-16 mission was Jing Haipeng, 56, a senior spacecraft pilot from China’s first batch of astronaut trainees in the late 1990s. He had travelled to space three times before, including two trips as mission commander.

Jing flew with Zhu Yangzhu and Gui Haichao, both 36 and part of China’s third batch of astronauts. The mission is Zhu’s and Gui’s first spaceflight.

Former military university professor Zhu will serve as spaceflight engineer while Gui, a professor at Beihang University, will serve as the payload specialist on the mission, managing science experiments at the space station.

Beijing is expected to launch one more crewed mission to the orbiting outpost this year.

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Also by the end of 2023, China is due to a launch space telescope the size of a large bus.

Known as Xuntian, or “Surveying the Heavens” in Chinese, the orbital telescope will boast a field of view 350 times wider than that of the Hubble Space Telescope, which was launched 33 years ago.

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WhatsApp rolling out archive feature for businesses on Android

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WhatsApp rolling out archive feature for businesses on Android

 WhatsApp is going to launch a new feature called “status archive” as a new business tool that will help people to share their previous status updates with their customers.

The feature is currently being rolled out to beta testers of WhatsApp Business for Android and will become available to more users in the coming weeks, a media outlet that closely monitors the updates in the messaging app said in its blog.

The users will receive a notification within the Status tab asking them if they want to enable the feature on their WhatsApp accounts.

When this feature is enabled, the status updates will automatically be sent into archives on the users’ device after 24 hours. In addition, people can manage their archive preferences and see it directly from the menu within the Status tab.

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The feature will help businesses to re-share the previous status in an easy way.

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NASA sets coverage for Axiom Mission 2 departure from space station

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NASA sets coverage for Axiom Mission 2 departure from space station

NASA will provide live coverage of the undocking and departure of Axiom Mission 2 (Ax-2) private astronaut mission from the International Space Station before crew returns to Earth.

The four-member multinational astronaut crew is scheduled to undock no earlier than 11:05 a.m. EDT Tuesday, May 30, from the space-facing port of the station’s Harmony module in a SpaceX Dragon spacecraft to begin the journey home and splashdown off the coast of Florida.

NASA will begin live coverage of space station joint operations with Axiom Space and SpaceX, starting with hatch closure preparations at 9 a.m. Tuesday, May 30, on NASA Television, the NASA app, and the agency’s website.

Mission teams will monitor weather at the possible splashdown sites prior to undocking to ensure conditions are acceptable for a safe recovery of the spacecraft and Ax-2 astronauts.

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Ax-2 Commander Peggy Whitson, Pilot John Shoffner, and Mission Specialists Ali Alqarni and Rayyanah Barnawi, both representing the Kingdom of Saudi Arabia, will complete approximately nine days in space at the conclusion of their mission. Their SpaceX Dragon will return to Earth with more than 300 pounds of cargo, including NASA hardware and data from over 20 different experiments.

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