Tesla, which had vowed to go all-in on AI·robots, cuts investment by $5 billion… two variables for Korean industry - 경향신문
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Elon Musk, Chief Executive Officer (CEO) of Tesla, enters the White House holding a coffee. Reuters/Yonhap News
Tesla, which had pledged to transform into an artificial intelligence (AI) and robotics company, reduced its investment plan for this year by $5 billion (about 6.6 trillion KRW). This created a gap between the intention to expand investment in future businesses and the actual deployment of funds. It is not yet clear whether this is a strategic retreat or a rescheduling of investments. For domestic industry, however, two variables have emerged: uncertainty in order timing due to delayed investment, and an expansion of Tesla in-house production.
At its third-quarter earnings release on the 21st (local time), Tesla lowered this year’s investment outlook from ‘more than $25 billion’ to ‘about $20 billion (about 26.5 trillion KRW)’. This reversed the target back to the original level six months after it was raised in April. Third-quarter investment came to $4.73 billion, far below the market expectation of about $7.5 billion compiled by financial data provider LSEG. Cumulative investment for the first through third quarters was $13.01 billion. To meet the previous target, the company would have had to spend about $12 billion in the fourth quarter alone.
Spending was lighter in future businesses. CEO Elon Musk said investment in the semiconductor plant ‘Terafab’, which will directly manufacture AI chips for self-driving cars and robots, will increase starting next year and reach tens of billions of dollars by 2028. The first test chips are targeted for MayJune next year, with full-scale mass production aimed for the third quarter of 2028. For the humanoid robot ‘Optimus’, he added that reaching the target output of 20,000 units per week will take at least a year, and suggested the timing for external sales would be around the end of next year.
The humanoid robot ‘Optimus’ that Tesla is developing performs a demonstration in front of the Nasdaq building in New York on October 27 last year. Reuters/Yonhap News
Some analysts say it is necessary to distinguish whether Tesla’s investment reduction was a decision to manage cash flow or the result of future business investment execution being delayed relative to plan. The company cited efficiency in capital allocation but did not specifically explain the background for lowering the investment outlook. Thanks to reduced investment, free cash flow in the third quarter recorded a surplus of $1.53 billion (about 2.03 trillion KRW), easing immediate funding pressure.
With the core business weakened, the significance of this figure was greater. Third-quarter revenue was $28.046 billion, similar to a year earlier, but operating profit fell 56% to $718 million. This surplus, for now, has eased concerns of a ‘money pit’. However, U.S. investment analytics firm TIKR analyzed that about half of the surplus reflected an increase in accounts payable that have not yet been paid.
There is also the SpaceX variable. Tesla disclosed in its quarterly report that it had formed a special committee to review a business combination with SpaceX and other matters. Musk mentioned that the two companies need to decide how to split Terafab costs. In other words, Tesla may not have to bear the massive factory costs alone.
That does not mean its resolve regarding future businesses has waned. Chief Financial Officer Vaibhav Taneja said investment will continue to increase over the coming years. To that end, Tesla has secured a $30 billion (about 39.8 trillion KRW) credit line. Even so, the market reaction was cold. On the 22nd in New York trading, Tesla shares fell 3.1%.
The shock to domestic industry does not appear likely to be large for now. The reduction this time concerns money for building plants and installing equipment, while spending to purchase batteries moves with production volume. In the short term, demand for the large energy storage system (ESS) ‘Megapack’ could be an opportunity for domestic battery makers. Tesla said most of the 2027 Megapack volume has been sold, and LG Energy Solution plans to supply batteries for Megapack from its Lansing, Michigan, plant starting in 2027. Of course, an increase in demand for the finished product does not mean suppliers in Korea will see their volumes rise by the same proportion. As Tesla is expanding in-house battery production, the actual scale of benefits will depend on supply contracts and the sourcing structure.
The next part is the issue. In the third quarter, Tesla shipped Megapacks for the first time that included ESS batteries it manufactured in-house. It remains unclear how much in-house production will substitute for external procurement. However, as Tesla increases production capacity, suppliers may face greater pressure in price and volume negotiations.
Semiconductors have a similar structure. In July last year, Samsung Electronics signed a $16.5 billion (about 22 trillion KRW) contract to contract-manufacture the Tesla next-generation AI chip ‘AI6’ through 2033. However, if Tesla builds its own semiconductor production facilities, it will gain an option to reduce reliance on external foundries over the medium to long term. That said, because the capacity, yield, and mass production schedule of Terafab are still variables, it is difficult to predict the impact on the contract with Samsung Electronics right away. For domestic equipment and materials makers, new investments could bring order opportunities, but if investment execution is delayed, those opportunities could also be pushed back.
Given that timelines presented by Musk have repeatedy been delayed, some warn that it is risky to increase equipment based on announcements alone. The earnings release next January, which will present the fourth-quarter investment amount and the plan for next year, is the first test. An industry official said, “Tesla is the biggest customer, but it can become a competitor at any time, so we have no choice but to act based on actual contracts and order volumes rather than announcements.”
