Tesla (TSLA) Faces Potential Cash Flow Challenges Amid High Capital Expenditure

🗝️ Key Points

• Tesla (TSLA, Financial) announced it will spend approximately $44 billion on capital expenditure through early 2025.
• For the fiscal year 2024 alone, expenses are projected to hit $10 billion, with an additional $8 billion planned for 2025.
• This significant spending has raised concerns about Tesla's cash flow, as the company's capital expenditure is on a downward trend.

Tesla (TSLA, Financial) announced it will spend approximately $44 billion on capital expenditure through early 2025. For the fiscal year 2024 alone, expenses are projected to hit $10 billion, with an additional $8 billion planned for 2025. This significant spending has raised concerns about Tesla’s cash flow, as the company’s capital expenditure is on a downward trend. Wells Fargo has highlighted fundamental issues, predicting negative free cash flow for the first time since 2018. The firm maintains a “sell” rating on TSLA stock with a target price of $120.

Tesla’s vehicle delivery forecast for the second quarter is 343,000 units, matching the first quarter but falling 17% short of market expectations. Reduced revenue from zero-emission vehicle credits could further squeeze Tesla’s profitability. If capital expenditure remains at $11 billion, operational pressure could turn 2025’s free cash flow negative, marking a seven-year low.

Key investment areas include the construction of a new plant in Mexico, Cybertruck production lines, and AI technology development. Projects like the Robotaxi pilot in Texas might be delayed until September. CEO Elon Musk shared that AI investments would reach $10 billion in 2024, with Tesla’s AI platform advancing through several iterations.

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