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Elon Musk predicts mild 18-month recession, teases share buybacks

Tesla CEO Elon Musk gestures as he visits the construction site of Tesla’s Gigafactory in Gruenheide near Berlin, Germany, August 13, 2021.

Patrick Pleul | Reuters

At the Tesla 2022 shareholders’ meeting on Thursday, investors asked CEO Elon Musk how the company plans to spend its money in coming years, and about his global economic outlook.

Musk joked that “making macroeconomic prognostications is a recipe for disaster” but nonetheless estimated that “we are past peak inflation” and likely to see a “relatively mild recession,” lasting for about 18 months.

The CEO based his economic analysis on the commodity prices Tesla is being asked to pay for materials and goods it needs to make electric vehicles.

“We do get a fair bit of insight into where prices of things are going over time because when you’re making millions of cars, you have to purchase commodities many months in advance of when they’re needed,” he said.

In the second quarter of 2022, Russia’s war on Ukraine and the ongoing Covid pandemic in China hampered Tesla’s Shanghai factory, and worsened supply chain snarls, parts shortages and labor problems throughout the auto industry.

Musk was also asked how Tesla plans to use its capital in coming years. The CEO said Tesla will primarily increase its capital expenditures and research and development spending “as fast as we can do so without wasting it.” He added that “a sort of share buyback is possible,” depending on what Tesla’s future cash flow looks like.

Musk, who is also the CEO of SpaceX, said he “wouldn’t want to commit” to Tesla share buybacks just yet, and that a force majeure event somewhere could change the equation. However, he reiterated that if Tesla’s future cashflow is looking solid, and the world is “relatively stable,” then a “share buyback is on the table.”

20 million cars a year in about 12 factories by 2030

3 million job applications

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2022-08-05 06:48:47

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