Tesla’s (NASDAQ:TSLA) Q3 10-Q Form for 2020 provided some interesting tidbits about the electric car maker’s plans for the coming years. Among these is the fact that the company is planning to increase its capital expenditures to about $4.5 to $6.0 billion in the next two fiscal years. These would be the highest expenditures that the company would be spending on its projects yet, with the amount rivaled only by 2017, when Tesla was dealing with the Model 3 ramp.
“Owing and subject to the foregoing as well as the pipeline of announced projects under development and all other continuing infrastructure growth, we currently expect our capital expenditures to be at the high end of our range of $2.5 to $3.5 billion in 2020 and increase to $4.5 to $6.0 billion in each of the next two fiscal years,” Tesla wrote.
While Tesla’s 10-Q Form noted that CAPEX will be higher than ever in the next couple of years, the company’s estimates still suggest that it has reached an incredible level of efficiency in terms of its expenses. It makes sense for Tesla’s CAPEX to be higher than it ever was, after all, since the company will be making more vehicles than ever before, and it would also be building factories in Berlin, Shanghai, and Texas. The company will be ramping its battery cell production capabilities as well.
As noted by Galileo Russell of YouTube’s Hyperchange channel, Tesla’s expectations for its CAPEX in 2021 and 2022 suggest that the electric car maker has become about five times more efficient on spending per unit of vehicle production compared to 2017. Interestingly enough, Elon Musk responded to the Tesla investor’s observations, lightly noting on Twitter that the company’s CAPEX efficiency back in 2017 was “trash.”
A look at Tesla’s capital expenditures over the years shows that Musk was telling the brutal truth. Back in 2017, Tesla’s CAPEX peaked at about $1.2 billion in one quarter as the company was launching the Model 3 in the Fremont Factory. Today, Tesla’s CAPEX has not broken this record, despite the electric car maker undergoing the Model Y ramp, the buildout of Gigafactory Shanghai, Giga Berlin, and Giga Texas, as well as an expansion of its battery production capabilities.
With this in mind, capital expenditures of $4.5 to $6.0 billion annually within the next two fiscal years seem to be a steal. This was mentioned by Russell on Twitter, and Musk responded by stating that the Tesla team has done excellent work over the years to make such progress possible.
What is rather remarkable is that Tesla is nowhere near done in the optimization of its operations. Over the years, and as the company attempts to hit its goal of producing millions of vehicles annually, there is a pretty good chance that Tesla would still improve and optimize its capital expenditures further. This would work in the company’s favor, especially as it attempts to build more factories and start the production of its upcoming electric vehicles like the Cybertruck, Semi, and the highly-anticipated $25,000 car.
If Tesla could accomplish these, the company would likely end up mastering the art of building electric car factories in a way that is frighteningly quick and capital-efficient, much like how it mastered the mass production of premium electric cars like the Model 3. This goes in line with Elon Musk’s statement back in July, when he noted on Twitter that the “Gigafactory is the product even more than the car.” The fact that every Tesla facility seems to be larger and more optimized than its predecessor highlights this idea.
During Battery Day, Elon Musk and Drew Baglino remarked that Tesla would need to produce an insane amount of batteries to achieve its goal of accelerating the advent of sustainable energy. This requires the company to build numerous factories at a rate that’s higher than ever before. With this in mind, there seems to be a good chance that Elon Musk’s “Alien Dreadnought” concept may see a resurgence in the near future. With a lineup of hyper-advanced factories that produce clean energy products at an optimal cost, after all, Tesla’s upcoming facilities may very well be considered as fleet of extraterrestrial machines that build machines.
Watch a discussion of Tesla’s CAPEX efficiency improvements in the video below.