With the release of its Q4 2022 earnings today, Tesla is making it clear to shareholders that it plans to keep cutting the cost of its electric vehicles to withstand “uncertain” times.
If there were a theme to Tesla’s Q4 2022 shareholder letter published today, it would be cost-cutting.
Tesla started out by writing:
As we progress into 2023, we know that there are questions about the near-term impact of an uncertain macroeconomic environment, and in particular, with rising interest rates. The Tesla team is used to challenges, given the culture quired to get the company to where it is today. In the near term we are accelerating our cost reduction roadmap and driving towards higher production rates, while staying focused on executing against the next phase of our roadmap.
The company is making that statement after implementing some massive price cuts across its entire lineup earlier this month.
Investors are worried about the impact on the company’s profitability.
While we won’t know the exact impact until the next earnings report, shareholders do get some hints at the impact from the Q4 2022 results released today.
Tesla confirmed that 51% of the 405,000 vehicles it delivered in Q4 were delivered in December when Tesla started to offer some significant discounts on its vehicles.
Despite half of its deliveries getting discounted, Tesla only took a two-point hit on its automotive gross margin in Q4 – going from 27.9% in Q3 to 25.9% in Q4.
That’s encouraging for shareholders, but the gross margin hit is expected to be much bigger in Q1 since the price cuts are more significant than the discounts Tesla was offering in December 2022.
To further highlight opportunities to reduce costs, Tesla noted that it has been able to reduce its end-of-quarter delivery waves. The 51% of vehicles delivered in the third month of the quarter in Q4 is down from 74% in Q2.
Tesla says that it is working to keep bringing that percentage down for smoother deliveries throughout quarters, which should help with costs.
At the end of its shareholder’s letter, Tesla again reemphasizes that cost efficiency is crucial:
We are particularly focused on vehicle cost during this period of macroeconomic uncertainty, high-interest rates (thus higher cost of vehicle financing) and vehicle price deflation. We continue to focus on cost efficiencies while improving functionality and reliability. While cost-efficient manufacturing of EVs is still rare across most of the industry it is critical for profitability.
Tesla seems confident that it can keep its lead in selling electric vehicles profitably.
Electrek’s Take
I think Tesla is onto something here – especially with that last comment. It is almost a warning to the rest of the industry that if they can’t keep their EV cost down and start selling EVs profitably, they are in real trouble.
Today’s earnings were encouraging for investors with Tesla only taking a two-point hit on gross margins. Q1 will be much worse, but I now think it’s possible Tesla could still maintain something close to 15% gross margin despite the big price cuts.
Most automakers would sell their soul to the devil to get 15% gross margins, especially on electric vehicles.
“Honda hydrogen is open for business,” says David Perzynski, assistant manager of hydrogen solutions development at American Honda. “(We have) the fuel cell technology, the expertise, and the supply chain to power a variety of zero-emissions products, including commercial trucking and stationary power generation.”
The company arrived with a more developed version of its Peterbilt 579EV-based HFC semi concept, which is based on one of that brand’s existing BEVs and uses the Honda fuel cell as a range-extending generator for its 120 kWh battery … or, rather, it would – if it was ever plugged into a charger.
On battery power alone, the big Pete is good for up to 150 miles of fully loaded range. With the fuel cell along for the piggyback ride, however, the truck’s range climbs to more than 500 miles at an 82,000 lb. combined vehicle weight.
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More than just a range-extender
Honda envisions a world where its hydrogen fuel cell is used in much more than transportation and logistics applications. At the ACT Expo, Honda had a scale mock-up of what a hospital-sized hydrogen backup generator could look like – and hinted that such an installation might soon become a reality.
This is all very normal for Honda
Honda FCX hydrogen fuel cell concept; via Honda.
If it seems weird that Honda is pushing hydrogen so hard these days, it shouldn’t. Honda’s been developing hydrogen fuel cells for nearly forty years, and put its first hydrogen fuel cell car (the FCX concept, above) all the way back in 1999.
Since then, it’s put a number of hydrogen fuel cell-powered vehicles into series production, including the innovative Honda CR-V HFC hybrid that lets you fill the car’s 17.7 kWh battery with electrons at home for up to 29 miles of all-electric driving, then fill up the hydrogen tank for another 241 miles of driving … and they’re not stopping there.
We had a chance to chat with David Perzynski on Quick Charge last year, where he talked us through some of Honda’s hydrogen plans in more detail. You can check it out, below.
Volkswagen of America is recalling nearly 5,700 2025 VW ID. Buzz vans because the NHTSA says the third-row bench seat is too spacious. (For real.)
According to the National Highway Traffic Safety Administration (NHTSA), the third-row bench is physically wide enough for three people, but it’s only designed to hold two, so it’s only equipped with two seat belts. That mismatch violates Federal Motor Vehicle Safety Standard number 208, which covers occupant crash protection. A bench that invites three passengers but only protects two isn’t just awkward – it’s a safety risk. It simply makes it too easy to squeeze that third person in the back “just that once” without a seatbelt, and that’s inviting trouble.
Volkswagen will fix the ID. Buzz issue by having dealers install “fixed unpadded trim parts” that adjust the seat’s usable width, and they’ll do it for free, because recall repairs are always free. It’ll probably be hard plastic on the seat to ensure a third person can’t squeeze in. Owner notification letters are expected to go out starting June 20, 2025.
Volkswagen has reported that, to date, there have been “no field claims known” of safety issues caused by the extra-wide third row bench seat.
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Electric vehicle charging and battery storage specialists Zenobē have inked a deal with Canadian leasing company 7Gen to fund more than 500 commercial EVs and their associated charging infrastructure.
Last week, Zenobē agreed to provide up to $48 million (Canadian) in debt financing to 7Gen to help expand its vehicle-as-a-service electric truck leasing program across Canada.
7Gen supports fleet operators with a comprehensive set of vehicle leasing and financing solutions that cover EV charger deployment, energy management systems, and ongoing operational support for Canadian fleet customers operating electric trucks, vans, and school buses.
Zenobē secured $1.6 billion in equity from its joint majority shareholders KKR and M&G Infracapital to fuel its global expansion into EVs and grid-scale batteries back in 2023. Since then, it’s grown to support more than 2,000 EVs and 120 charging depots across markets in the UK, Europe, Australia, and New Zealand.
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“We’re bringing our innovative funding approach to Canada and specifically to 7Gen,” says Steven Meersman, Co-Founder and Director of Zenobē. “We see momentum behind decarbonization in Canada’s supportive government policies and the clean, affordable power that will ensure a lower total cost of ownership for zero-emissions vehicles. We look forward to sharing our global experience electrifying over 120 depots to benefit 7Gen, its fleet customers and the wider electric fleet market in Canada.”
That innovative funding strategy is something Steven and I had a chance to discuss this week at the ACT Expo in Anaheim, California. “We’re being very careful in the way we approach the North American market,” he said (paraphrasing). “The market is fairly littered with the graves of other UK EV companies that have tried to find a foothold here and failed, so we’re being very careful about our partners.”
Despite living just a few minutes from his Chicago HQ, I’d never met Steven before this week. He’s a super-interesting guy and you will definitely learn a thing or two about how to build a multimillion dollar energy management company like Zenobē from our upcoming podcast (stay tuned for that). But the news here is 7Gen.
“Zenobē’s debt financing supports 7Gen’s next growth step and allows us to help our customers step up the pace of their EV adoption and benefit immediately from operational cost savings,” says Frans Tjallingii, CEO, 7Gen. “Zenobē’s team is well aligned with ours and we are thrilled to partner to scale our impact in Canada together.”
The company will begin rolling out its Zenobē-funded electric trucks in the coming weeks, with new partners and projects set to be announced shortly.
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