5 hot-button issues facing Tesla as it looks to join $1 trillion club

After an unimpressive start to the year marred by a debate over its $1.5 billion Bitcoin purchase and fears over a potential backlash in China, the stock has been on a tear. Since CEO Elon Musk published historic second-quarter results in late July, it has outperformed the S&P 500 by 30%. 

With Tesla the only major carmaker to grow shipments over the last three months amid a chip shortage and supply constraints continuing to support pricing power, analysts expect another blowout when it posts results on Wednesday. It could provide that last bit of momentum needed to eventually propel the $870 billion carmaker into the pantheon of corporate titans valued at $1 trillion or more, joining the likes of Apple, Microsoft and Amazon.

Nothing seems to be slowing Tesla, either, with Musk confident his company can maintain a minimum 50% annual growth rate in sales volume “for quite a while.” In fact one of the biggest challenges in Q3, according to him earlier this month, was not chips but ships—a problem that should gradually ease now that an upcoming new European factory should gradually reduce the need to import cars there from China.

With excellent results almost a certainty, investor attention is likely to focus on broader issues. Here are five themes that may play a role in the earnings call, which for the first time will not likely feature Musk.

GigaBerlin

With the new Texas plant looking ready to soon begin production of Model Y crossovers, the big question mark remains Tesla’s new German plant. The company held a County Fair this month to drum up popular support for the site, which has been under attacks from local advocacy groups worried about its effect on the region. German public TV posted a half-hour documentary highlighting concerns over the region’s water supply and Tesla’s anti-union stance in a labor-friendly country. Tesla’s future plans for Europe depend, however, on massive production growth in the factory. For that reason, Musk said he still hoped to get final permission to finish the factory in the coming weeks so as to deliver the first Model Y vehicles to customers before year-end. Thus far, Tesla has been constructing the enormous factory—on the risk that Musk may have to pay to demolish it, should the site not receive final approval.

Cybertruck

This week Tesla shocked the Tesla community by effectively pulling the upcoming Cybertruck from its online ordering site. Customers can no longer place a deposit on a specific model, for example, the hotly anticipated tri-motor version. Neither specifications nor prices are available, a move that suggests Tesla could end up dramatically hiking the cost to consumers (the base truck at $39,900 was less expensive than the smaller Model 3) or pull certain versions much like when Musk canceled the Model S Plaid+ at the last second this summer. More than 1 million deposits are believed to have been made on the vehicle. But the R1T from rival Rivian currently being launched is set to beat Tesla’s Cybertruck to the pickup market by what looks to be a full year.

Megapack

With energy prices for various fossil fuels soaring, Tesla would seem ideally positioned to capitalize with its household Powerwall and industrial-size Megapack systems that store intermittent renewable energy. Last month Tesla broke ground on a new factory in Lathrop, Calif., for producing these energy storage systems. One customer is the city of Houston, which aims to install a 100 megawatt battery farm, and Musk said he’s talking to Texas grid regulator Ercot about building other installations following the freak ice storms that caused power to go out across the state. Yet Musk admits progress has been slow since many of the same chips needed for these products are prioritized for its cars. “Over time we think the demand for stationary storage is going to be at least as high as the demand for vehicles,” he said.

Full Self-Driving beta

Ever since Tesla this month opened up Full Self Driving beta beyond early access testers to include all U.S. owners in principle, there has been a nagging problem: How do you keep the unfinished, experimental technology out of the hands of customers it deems are too risky without angering Tesla owners that paid for FSD. The misleading name suggests the assistance system is capable of driving unsupervised by a human, increasing the likelihood owners may not be paying attention when it does the “wrong thing at the worst time,” as Tesla warns. For the first time Musk suggested he may consider instituting a cutoff for all those with poor driving records to reduce the risk of accidents. Yet Tesla broke its own rules when it came to one of Tesla’s most bullish investors, granting Ross Gerber access even though his official safety score was dreadful. The fund manager told website Elektrek he believes Tesla gave it to him to hype the feature to his followers. Some fans are now frustrated at the thought that Tesla could arbitrarily refuse to give them access so long as it conveniently keeps FSD in a “beta” status. Europeans, however, don’t even have a chance of getting access currently.  

Courtesy of Tesla

Tesla Bot

One of the reasons why investors love Tesla is it always has a new story to tell markets. At Tesla’s A.I. day in August, Musk announced his team was working on developing a 5-foot-8 humanoid robot prototype it will showcase next year designed to do menial or dangerous tasks. Even though Musk has warned of the threat posed by A.I., he sees a burgeoning market for androids to exploit and reasons that Tesla already has expertise in artificial intelligence thanks to the neural network it uses to train FSD. The August reveal of Project Optimus, as it is internally called, came only weeks after South Korean rival Hyundai acquired robot manufacturer Boston Dynamics. Yet even some Tesla bulls question whether this is an unnecessary distraction.  

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