Dive Brief:
- Electric vehicle maker Tesla lowered its expected capital expenditure guidance for the full year 2026 to $20 billion compared to previous guidance of $25 billion, coming as it continues to invest significantly in its robotaxi fleet, robotics and artificial intelligence-related chip investments, CFO Vaibhav Taneja said Wednesday.
- The revision comes as “a result of managing our capital deployment efficiently and plan to fund it primarily from our cash flows from operations,” Taneja said Wednesday during the Elon Musk-led company’s third quarter earnings call.
- “This strategy will position the company for the next era of growth and disrupt many existing markets while creating new ones,” Taneja said Wednesday according to an earnings transcript.
Dive Insight:
The revision in capex raises question about CEO Musk’s ambitions to transform Tesla beyond an EV maker into an AI and autonomous tech leader, representing an abrupt markdown after the Austin, Texas-based company raised the guidance to $25 billion in its previous quarter, CFO Dive previously reported.
During its second quarter, Tesla touted the increase in spending as a way to open up new opportunities across new areas as it dealt with weaker automotive sales and slow expansion in key areas like its robotaxi fleet, CFO Dive reported.
Executives including Musk and Taneja on Wednesday pointed to expected strong spending growth during the next few years as Tesla continues to invest in new autonomous technologies, including increasing production capacity for its Optimus robot and investment in semiconductor fabrication, the CFO said.
The EV maker is in a “huge investment cycle to set us up for the future,” Taneja said during the earnings call.
“I'd like to stress that what we are trying to do is literally take over every part of terrestrial transportation,” Taneja said of the company’s ambitious strategy, with the compjany looking to “basically own this transportation of any kind on Earth.”
However, the pace of spending has declined quarter-over-quarter despite the investment push, falling to $4.7 billion for the quarter ended Sept. 30 compared with the $5.7 billion during the previous quarter, according to its Q3 shareholder deck.
Executives on the call, including Musk and Taneja, pointed to strong momentum in Tesla’s third quarter ended Sept. 30, including increased automotive demand and production, according to the earnings call.
Despite reduced guidance, Tesla remains confident expenditures will continue to grow, the CFO said. In anticipation of the future increase in capex, the EV maker also secured $30 billion in new credit facilities during the quarter, including a $20 billion senior unsecured three-year term loan facility, $8 billion in a five-year revolving facility and $2 billion in a senior unsecured 364-day revolving credit facility, according to a Sept. 29 filing with the Securities and Exchange Commission.
“Our confidence in the cash generation capacity of our business and the investments we are making drove our belief to secure shorter-term financing,” Taneja said, noting Tesla doesn’t plan to draw on the facility during the remainder of the calendar year.
Still, the pullback in spending could put a hitch in Musk’s plans to pivot Tesla to an AI and SI business and could stymie a potential merger between the EV maker and Musk-owned company SpaceX, Bloomberg reported.
Musk previously floated a potential merger between the two entities Tuesday during the earnings call for SpaceX, noting that Tesla and SpaceX have formed special committees to discuss a potential merger “at the request of shareholders,” he said.
The committees are comprised of independent directors, and as a conflicted party, Musk is not permitted to be part of the discussions, he said Tuesday — likening it to an “odd kabuki dance where two groups of people are talking and I can’t be in the conversation,” he said according to an earnings transcript.
A potential merger could value the combined entity at more than $5 trillion, according to some estimates.
Still, Musk cautioned SpaceX investors that a potential merger requires the support of both sets of company shareholders — in particular, requiring 50% of all shares in Tesla to approve, he said.
“I think some people out there assume that a SpaceX and Tesla merger is a certainty. And I think that would be overstating it,” Musk told investors during SpaceX’s earnings call Tuesday. “Do I think it would be a good idea, yes.”
Musk declined to discuss the merger further during Tesla’s Q3 call.
“With regard to a potential merger with SpaceX, I think I said everything that should be said yesterday, tap-dancing through a minefield there,” Musk said Wednesday.
