on Barons Tesla profit margins are falling why it needs to start advertising this is going to be good Tesla will report third quarter earnings in about a week investors will be paying close attention well okay let's just jump in here shortsighted investors will be paying close attention to gross profit margins amid falling prices for Tesla's electric vehicles price Cuts have been a theme of 2023 for the industry oh so it's not just Tesla isn't that interesting it's almost like record high interest rates and insane interest r increases over the last 18 24 months have made purchasing Big Ticket items which people often Finance like Vehicles more difficult imagine that it's time for investors to ask management about something else where are the Tesla advertisements so as we know due to Alon musk believing in soliciting and acting upon feedback from investors AKA listening to investors after somebody asked musk on Tesla's recent annual shareholder meeting what about advertising Elon said sure we'll try a little advertising key word little since then they've been running ads on Google which by the way in my opinion Far and Away the best form of advertising in terms of being able to measure the outcome everything else little bit of a show that could be wrong you can somewhat correlate oh we ran an ad here there was this change but it's so much easier to measure directly with click-through rates with online ads and so on that being said if I were running advertising the very first thing I would try online ads keywords messaging headlines and so on see what works AB test is this more effective is that more effective get an idea for the most effective way to message and advertise your products and once you've got that then start expanding into other varied and less trackable forms of advertising and slowly scale from there for example you might then do a very small amount of print and or billboard advertising then eventually when you figured your out completely you might have some ads in print and then maybe just maybe eventually start running some ads on the propaganda machine box fake news broadcast device what's it called I don't know I haven't used one of them for like 15 years wait it's more than that now let me do the math oh 19 years uh yeah literally haven't watched one for 19 actually 20 years was 2003 I last watched a television holy bro sorry I'm so bad at math that's why I'm a YouTuber not a Wall Street stock analyst speaking of ads by the way sorry to jump around but this is kind of important back in mid July the very first Tesla ad appeared outside of Google hilarious caption here from hallmar let's look at the full thing page ad in relatively small magazine notice a severe lack of cluster just like inside a Tesla vehicle the best part is no part the best in your print advertising is no why all you need to say is one what's the product and two it's the best selling car in the world if it's the best selling car in the world all you need to know is what it's called that it's absolutely embarrassing the so-call competition no need to list the specs and why because it's the best selling car in the world it speaks for itself and then tell people where they can test drive very simple I like this kind of advertising as somebody who previously worked by the way in the advertising industry just like to remind everybody who gets mad when I say that I would prefer Tes a didn't advertise not that it's not effective they're separate things I just would rather they focus on their mission I didn't give a about short-term margins but as someone who literally used to work in the ad industry I used to make these things like full page ads I used to make these things among others I like Simple and Clean yet it's so hard to get a client or a customer to agree to a simple ad like is there's so much empty space can't you put 12 bullet points about how amazing things are in here no it stands out cuz it's not a cluster and the message is quite clear so so far Tesla's advertising seems to be on point this was July we're now in October so it's like T hasn't begun advertising oh and uh can confirm yesterday's video Lucid did in fact spend 00 million on Advertising their products in the last 12 months $100 million they still can't sell hm isn't that interesting but we're not done yet with the advertising look at what I found on X today check it out now we're going to watch this no sound on but this is at the Tokyo International Airport showing some of Tesla's products in real time in fact just focusing on the model y now this is kind of important because this is a big step forward not just print advertising but now in an airport and in addition this is in Japan the home of the company who will suffer the most as a result of Tesla putting them out of business that of course being Toyota so this is very cool to see I'm sure there are many folks right now thinking oh Steven they need to start running Super Bowl ads don't you understand it's not going to work if they've got ad in airports bro I personally believe as I mentioned earlier Tesla is slowly scaling their advertising up testing figuring out what messaging works find a cheap spot here or there and go for it now for the record if you don't know Starling has been doing a lot of advertising especially in airports in Regions they're trying to expand I posted this on X around Christmas unlike a vehicle which people typically it's a big ticket item they think about all the time people are often jealous of what others are driving a lot of people try to identify with their vehicle how many people try to compensate for micro Painis with the internet provider they use probably zero what about a vehicle Lots so a product like starlink internet is something you really do need to shove in people's faces otherwise who's thinking about changing internet providers like it's very rare that you do so muskin companies don't have an aversion to advertising they're just clearly not in a rush and I think that's a wise move so after that long detour back to the article Tesla doesn't really advertise now In fairness to Al rud he's right they don't do a lot of advertising they are doing a small amount so but it's not major as opposed to again Lucid $100 million pissed away trying to sell their overpriced luxury Vehicles Tesla has X accounts and its website and strong word of mouth but no ads during football games oh there we go or reality TV shows Tesla prefers the blunt tool of price cuts to boost demand the problem is the price Cuts aren't really working huh now I'm sure we're going to hear about why these supposed price cuts are are not working or not really working and I have to give credit to Al doesn't really adverti aren't really working if the price guts aren't really working that would mean that there's a huge buildup of Tesa inventory right or alternatively they've decided to slow down their rate of production neither of these things are true price elasticity is the economic concept that explains the change in demand for a change in pricing if prices are cut by 10% and demand goes up by 10% the elasticity is one conventional wisdom explains that elasticity for safe food is relatively low and elasticity for discretionary items like a car is higher so falling car prices should lead to higher sales now I have to jump in here this is true in fact a linear decrease in price typically here will cause an exponential increase in demand unlike food where lower price eh there's only so many eggs you can eat lowering the affordability barrier of Entry to purchasing a vehicle will have a massive difference however I have to point this out we are in dire Economic Times the worst situation economically for the automotive industry in terms of sell through of products in the last decade and a half one more time this is the worst period for the automotive industry and demand for vehicles is in consumers who want Vehicles now they still want them but they're delaying purchases because of uncertainty and all they can't Finance can't afford the interest and so on it's a worst time in 15 years this is a temporary anomaly a distortion in SpaceTime it's like a black hole High interest rates are bending things and distorting our perspective of what's going on it's a very easy mistake to make in a lot of people are doing so right now I'm going to tell you guys what's going to happen spoil the movie so if you don't want to know Skip ahead about 30 seconds but here's what plays out when interest rates start coming back down all those consumers Who currently aren't buying a vehicle who still want to buy one who are on the fence about oh maybe you'll buy ice maybe you'll buy electric by the time interest rates are down and they can afford a vehicle and they're not concerned about losing a job or paying their mortgage and so on many people who previously would have purchased an ice vehicle today are instead going to purchase an electric vehicle this is actually going to pull forward EV adoption but in the short term because of the uncertainty many consumers will either opt to buy a much much cheaper ice vehicle in the short term and think oh well I can't really afford to spend that little bit extra to get the better vehicle the electric one or just you or they're not going to buy anything at all this is going to mean a huge amount of pain for companies trying to sell vehicles over the next I don't know until interest rates go down I don't have a crystal ball some prior predictions seem to test otherwise but my best guess 12 months from now interest rates are on the way down 24 months very likely much lower than they are today and between now and then over the next 12 18 24 months there's likely to be continued downward pressure on pricing to sell through production and I don't give it sh 10 years from now no one's going to remember this point in time back to the article it isn't working out that way Tesla has cut prices by 17 to 27% on versions of its highest volume model 3 and model y Vehicles over the past 12 months before price cut started the Wall Street consensus estimates for 2023 deliveries was 2 million unit oh God damn it dude hey Al you might be in fact I know you're watching cuz last time I covered one of these things he tweeted about it he was excited shout out to Al keep it up let me explain Al the reason that the consensus estimate for Tesla delivery is lower is not because there is a lack of demand it's because they had planned Factory shutdowns this quarter losing a significant amount of production Tesla still producing Vehicles as fast as they possibly can this is important they could not have produced any more Vehicles this year than they already have unless they didn't upgrade the model 3 this is important nuance and context couple years ago Tesla also had Factory shutdowns although these were forced fascist futile you know to protect everybody from the extremely dangerous plague that was less dangerous than the things that people were forced to take to let's not go there I don't want to get canceled anyway Wall Street estimates for 2023 were based on Tesla producing Vehicles all year on all production lines at all facilities and continuing to ramp production nobody at least not that I'm aware of please correct me if I'm wrong on Wall Street had an es 2 million units in a caveat saying oh by the way we also expect that there'll be planned Factory shutdowns in Q3 or this quarter or that quarter lose a couple hundred thousand of production while there's upgrades for model 3 Etc by the way there was also some upgrades for model y recently more minor and cyber truck production a little bit slower than well I was going to say slower than expected but probably should have been expected to be pretty slow but this is explicable okay there is a reason why the consensus estimates have come down and it's not because of a lack of demand it's because of lack of production in Q3 and a lack of cyber truck production as well this has got nothing to do with demand if you have shut down production lines you can't produce Vehicles so that's the reason it's got nothing to do with pricing again they're still selling every vehicle they produce so according to Al who's now been fact checked that's negative price elasticity see IL musk essentially argued in July that cuts offset weakening economic demand and Rising interest rates surely there is something to that correct still the cuts just aren't all that taking price reductions and higher rates into account the average monthly repayment for a Tesla is down perhaps 10% year-over-year a 10% cut still yielded a 10% reduction oh here we go damn dude the price Cuts have cost Tesla roughly 20 billion in sales Wall Street has cut its 2023 consensus sales estimate by nearly the same amount to just below 99 billion according to fact set from 119 again this is based on the number of vehicles produced and sold Factory shutdowns less Vehicles numbers go down the that couldn't have all been saved with ads but the point is it's time to try something else like the print ads the Google ads the airpod ads that are scaling up I think they are trying something else but again you know what matters more than focusing on advertising campaigns and messaging and how to trick people in you're buying your products just make them better and cheaper ultimately that will win now again as I mentioned this is the worst time for Automotive Sales in the last 15 years this is a fact given that if we look at these events through the current lens the economic sh storm it is understandable there's some weakness and pricing is making less of an impact right now than it would at other points in time and if you guys would like some evidence of that rewind the clock couple years when interest rates weren't so insane and look where Tesla's prices were going the opposite direction up Elon Musk literally called their prices embarrassingly High not long ago now think about this Elon Musk techno king of Tesla formerly the C o was literally on an earnings call describing Tesla's product prices as embarrassingly high embarrassingly high and now they're lower AKA more reasonable now another thing that I have to point out a lot of investors seem to ignore forget or just not realize Tesla's cost to produce electric vehicles is trending down this is quite different for example to an internal combustion vehicle manufacture having to lower their prices why because ice vehicles are mature Technologies you can't drive the prices down 10 7 8 12 15 20 30 40 50% over the next decade however that will happen with EVS in fact probably more than 50% over the next decade feel free to fact check me set a reminder check back in a decade people are looking at Tesla through the lens of being a typical automotive manufacturer and assuming if prices come down the only possible outcome is margins come down now it may be true if prices come down faster than costs come down costs are going to Trend down and prices in line with costs will turn down over time that's in Tesla's master plan if rates are through the roof and there's less robust interest in people who are previously thinking of buying a vehicle today tomorrow next month next week and now thinking next year two years later and so on it's important not to confuse these factors musk said he would try ads at the company's shareholder meeting in May no ads yet though now In fairness to Al this was published before the airport ads had turned up but there was a print ad previously and we also had seen Tesla running Google ads so not quite true but of course no Super Bowl ads just yet they' better be good when they show up recent EV ads to be kind are lacking for the most part well so too are the products they're trying to manipulate people into buying what are you going to do but some are clever oh God GM ran an ad during the 2022 Super Bowl with Will Ferell de crying how the US was trailing Norway in EV sales funny but why that would impact any American Car buyer's decision on personal transportation is tough to figure let me explain okay I people are going to get offended but it's true okay advertising typically not aware sometimes it's informative but often it's aimed at the lowest common denominator now in case you don't know literally 50% of people are below average intelligence think about this for a moment okay generally speaking the more intelligent somebody is I'm going to say it the less effective advertising is because someone who's relatively intelligent will do their own homework and make their own decisions as opposed to Oh I thought on the television oh look there was a funny animal in that commercial I'm going to buy their product the reason for using will farell was oh I like will farell will farell is funny man I love his movies I'm going to buy whatever their thing is they're just trying to associate will Farah with whatever the product was that's as simple as it is GM spent about 4 billion on advertising and promotions in 2022 which of course by the way certainly certainly doesn't influence any of the media coverage on GM cuz it's not like advertising was in the media who cover GM oh wait let's not talk about that more it didn't immediately respond to a request for comment about its EV advertising strategy Tesla didn't respond to a request for comment about its advertising plans to make a good or better ad it would probably be more effective to focus on clear benefits of EV ownership or debunking some EV myths and concerns now I actually strongly disagree on this one again a lot of people still do not know how compelling Tesla's vehicles are however I actually really like their strategy of just telling people it's the best selling vehicle in the world how about an analogy I try to get myself canceled today okay just imagine you're wandering down the street and you see I don't know a short fat ugly old dude wandering and he's got a tent around his arm an absolute smoke show your wife notices you looking and hits you elbows you hard and whatever I'm a man okay now the first thing you think to yourself is wonder if she's an escort but of assuming that's not you go oh hm well that guy obviously has something going on he's pulled a 10 I wonder what it is is he rich is he successful maybe he's got a kidney Rattler maybe all of those things are true there must be something about this guy to have such an attractive female in his company and now back to Tesla's advertising campaign well if they have the number one vehicle in the world number one selling vehicle in the world h i mean if it's a number one selling vehicle in the world there must be something about it right still today many many many people have no idea a that Tesla makes great Vehicles b how affordable they are but there's no need to start doing things like oh look here's the money here's a price why cuz prices change a lot you don't want something set in stone and then it changes all you want is tell people it's really good because obviously bestselling vehicle in the world the and then they'll do their homework now at some point in time it's possible T will need to start informing consumers about how their vehicles work blah blah blah blah blah but you have to understand roughly 80 million vehicles are sold globally per year Tesla roughly 2 million per year at the moment okay they don't need to sell every vehicle that's sold an entire year they just need to keep selling as they produce and my thesis remains unchanged which some people just find super hard to digest but it seems pretty logical thus far for every one Tesla that Tesla has sold the result of that on average it's created a disciple that has sold more than one Tesla to their friends family colleagues and co-workers it is the consumers of the products telling everybody about the benefits and the perks correcting their misconceptions informing them oh no you can charge quite quickly actually no it's not $600,000 it's actually like 42 no it doesn't spontaneously catch on fire in fact they're less like it it this is what happens on the ground level it takes time this has been happening and will continue to happen with Tesla don't get me wrong advertising certainly shoving a product in people's face will Garner more attention and accelerate that process but the worst possible thing that Tesa could do especially for the long term wait for it people are going to get mad when I say this but it's true is to run a big money advertising campaign attract a load of attention receive tens upon tens even hundreds of thousands of orders for its vehicles have weight times blow out to infinity and be forced to raise prices by tens of thousand of do just after running this ad so customers who are still seeing the ad we're thinking about it now paying 20 30 40% more than previously had there been no ads cuz oh these are way more expensive than I thought my friend told me that that's man I'm too expensive bro I got to waited that there are any of course about many folks talking about pricing being a short-term sugar hit and advertising lever and how important it is to build brand awareness and long-term brand value and wank wank wank wank wank is if Tesla does run an out that he's super successful at massive scale you know the end result will be since they're already selling with their production they will be forced to raise their prices by an absurd amount their prices will once again become embarrassingly high and weight times will get stupidly long I don't think that's a good strategy but hey that's just me some guy who knows nothing at all about anything benefits include total cost of ownership which is lower because home charging is cheaper than gas and EVS is less expensive benefits include total cost of ownership which is lower because home charging is cheaper than gas and EVS are less expensive to maintain over time the latter point in particular but your moving Parts concerns to address could include range anxiety cold weather range charging time on long trips safety risks or upfront costs of purchasing an EV with purchase tax credits most EVS sold in the US cost less than the average new vehicle price this is all true and again there's a lot of people that don't know this I'm not arguing that advertising would not inform these people I'm just pointing out if too many people realize again prices will become once again embarrassingly High think about that a consumer who was thinking oh Teslas aren't that great now oh they're seeing that oh oh wow oh that's way okay I'm going to buy one then they log on and go this what that's way more expensive than I can afford now they've decided okay I can't afford an EV how long until they revisit that decision probably a lot longer than if nothing had have been shoved in their face and then a year or two from now or 6 months from now their neighbor tells them hey bro yeah that model why man I got it was only at 42 Grand at six you want a test drive next minute sells a Tesla there are other ideas for Effective ads that at this point look way more effective than additional price Cuts now one more time what's Tesla's Mission accelerate the world's transition to sustainable energy not to make the maximum possible short-term profit for its investors this is really important so let's think about this folks because this is an actual mission that Tesla believes in as opposed to a bunch of corporate wankery that they just claim is their mission the way that Tesla accelerates the world's transition to sustainable energy is to make compelling electric vehicles affordable why because it's not only their own products that will sell and contribute but it will force others to produce compelling affordable electric vehicles or go out of business and this is their plan if you're ever confused about why T is doing something refer to their mission statement by Tesla driving prices lower instead of advertising try to maximize short-term profits they are forcing the other Automotive manufacturers on Earth to follow their pricing and continue to innovate forcing them to make more compelling more affordable products or they won't be in business then someone else will fill the void tesar is acting as a forcing function to wait for it ready ready accelerate the world's transition to sustainable energy I know this is going to be hard for some people to wrap their heads around but words matter and Tesla's mission statement is quite clear and again if you're ever confused please refer to the mission state which is more in line with accelerating the world's transition to sustainable energy maximizing short-term profits by running ads bumping up margins a little bit and selling electric vehicles at a higher price point in the same Market that other companies are also selling vehicles in meaning that there's less pricing pressure for them to drive their prices down and make their vehicles more compelling or to maximize the number of vehicles they produce and sell by doing whatever they need to with pricing the trend being down interesting to ponder as for gross profit margins tesra expected to produce Automotive gross profit margins excluding regulatory credits of just below 18% in the third quarter by the way this is significantly higher than just about any other automotive manufacturer on the planet aside from a few micro penol compensators like Ferrari Porsche and so on down a little compared to the second quarter Automotive gross profit margins peaked at about 30% in the first quarter 2022 right when Elon Musk was calling their prices embarrassingly High a number out around 17% would likely Al sh sorry I can't say that with the straight phrase would likely alarm investors yeah I won't be particularly concerned bro Will's Fargo analyst Colin Langan expects margins of about 16% due to Falling prices and weaker deliveries Tesla delivered some 435,000 vehicles in the third quarter down from about 466,000 in the second quarter Tesla advertising is such a Hot Topic among investors but I got to say it's all noise in this game of things wait what's that thing that just around the corner oh that's right robot taxis I just cannot wait a couple years from now when robot taxis are scaling up globally you know how many people are going to remember this the drama of the short-term gross Automotive margins and Teslas pricing coming down zero just saying want more content Early Access bunch of perks click the links in the pin comment athletic greens ag1 has given me a massive meaningful boost and energy allowing me to do a lot more every day including using my brain more and using my body more highly recommend you guys and girls check it out athletic green 81 is an excellent way to fill in nutritional gaps it's got 75 high quality vitamins minerals and Whole Food Source nutrients plus prebiotics and probiotics and digestive enzymes and adaptogens to help you deal with stress plus if you click the link at the pin comment or head to drink a1.com smm you can get yourself a 1-year free supply of vitamin D3 and K2 but don't take my word for it here's what some of you guys and girls have to say ag1 has changed my life I was as you described treating myself like a circus ate like trash rarely exercised use alcohol as a stress crutch cannabis also ag1 is what gave me the kick in the ass got me back to the gym motivated me to do more for myself family my business Etc keep doing what you do now I know there's some Skeptics the same kind of people who think Elon Musk is a fraud reading this G what do you thought there's no way that's possible bro it must be a placebo effect believe it or not this is a recurring theme if you give your body everything it needs to feel and performance best including having a lot more energy you'll need ways to use that energy for me personally that includes more exercise moving my body more more social activity and more cognitively demanding tasks including producing a fck ton of exclusive content over on Twitter and on patreon plus my daily YouTube uploads the proofs in the pudding on to another testimonial from a viewer of this channel SMR you asked me to provide feedback on ag1 here it is it has helped with mental acuity stamina and intestinal Waste Management uh can't bre between the lines certainly helps with regularity and digestion that's what the digestive enzymes are for it has also dramatically reduced my cravings for sugar you guys need to stop eating sugar it's poison I'm 50 59 and overweight AK a fat I think that's a technical term for overweight isn't it is it fat or obese I can't remember I average 100 hours a week in the west Texas oil fields as a safety supervisor Jesus Christ dude no wonder you're struggling to keep your weight under control control 100 hours a week brutal it has helped me lose weight it is not an appetite suppressant it can help fat people suppress cravings and motivation to be healthier is critical for changing your diet love you brother again this is a great point and something people really don't seem to grasp if you have more energy everything becomes easier it's like turning on easy mode for Life a few years ago before I was taking ag1 my health was trash I was struggling to get through the day had afternoon fatigue the last thing I wanted to do was either use my brain or move my body didn't have the energy now my big struggle every day is figuring out ways to use that energy I'm exercising way more doing a lot more with my friends and family and of course my work output has increased substantially and you can fact check me check out the average length of my videos I was posted on YouTube 3 years ago need I say more and one final testimonial love this one okay here's the deal for me with this ag1 I'm 41 years old and not the type to eat drink smoke or sleep healthy so I was skeptical that being said here's what I experienced day one me day two afternoon fatigue was about 45 minutes late late day three zero afternoon fatigue day four zero afternoon fatigue plus extra energy day five again zero afternoon fatigue plus energy wondering what the f really see this is the thing right the results for many people are just almost too good to be true this this is the same experience I had my afternoon fatigue just vanished out of nowhere I'm like wa what the why am I not tired in the afternoons anymore surely it's not that ag1 is it turns out it was day six and seven same thing day eight same thing plus I had the want to get things done around the house that I normally would slack off and not get done again the point extra energy you'll need to use it you'll find ways to use it day 9 10 and 11 and today is day 12 I love it so however you managed to get me to buy it I'm so glad you did thank you so much SMR it really changed me so far guys this really works just try it by the way this is the reason I continue to relentlessly promote ag1 a lot of people get real mad in the comments oh my God SN sold out oh my God he's a scammer this is fraud but constantly I'm pretty sure everyone making these comments is also currently short Tesla stock I'm not particularly concerned about people having a negative perception those folks suffering from small brain syndrome still living in my bums basement syndrome Etc writing mean comments claiming a1's a scam or it doesn't work I mean bro when I get feedback like this this is what keeps me going and remember there is a 90-day money back guarantee there's nothing to lose here just try this stuff for a month and if you don't get these results get your money back see it's a Lal no-brainer it's an IQ test at this point in time testimonial after testimonial after testimonial like this get your money back if it doesn't just try it for a month and if it doesn't work get your money back today's the day it's finally time be like this guy who was a massive skeptic but finally after a th000 promotions in a row caved in tried ag1 and has results like this head to drink a1.com smmr or click the link at the pin comment and please let me know how you're feeling in a few weeks time now if you'll excuse me time to put my extra energy to good use I'll be recording some more exclusive content for patreon and my Twitter subscribers so click the links and pin comment see you over on Twitter and or patreon and don't forget to grab your ag1 love you
