Tesla earnings reveal need for hardware upgrades

Tesla reported $1.4 billion in free cash flow during its latest earnings call, surprising investors, while its revenue met or slightly exceeded analyst expectations. While much of the financial performance fell into what observers described as a “we expected this” category, the call revealed a major logistical hurdle. CEO Elon Musk admitted that millions of vehicles sold between 2019 and 2023 will require physical hardware upgrades to run a future, unsupervised version of Full Self-Driving (Tesla’s advanced driver-assistance system). To execute these upgrades, Musk stated the company would need to set up microfactories (small-scale manufacturing facilities) in several major cities. This physical upgrade campaign could impact Tesla’s capital expenditures budget, which the company expanded to a whopping $25 billion this year.

Beyond Tesla, other North American mobility companies are restructuring or raising capital. Battery recycling firm Redwood Materials is undergoing a restructuring that includes laying off around 135 employees, representing roughly 10% of its workforce, as it shifts focus toward its growing energy storage business. Meanwhile, Humble Robotics, a U.S.-based autonomous hauler startup, raised $24 million in a seed round.

A series of other deals and developments shaped the broader mobility sector:

• Lyft’s expansion: Lyft is acquiring the U.K. business of ride-hailing app Gett for a reported $55 million, a move aimed at adding registered black cab (traditional London taxi) drivers in Greater London to its platform. This follows Lyft’s previous acquisition of multi-mobility app Freenow for about $197 million.
• Porsche divestment: German automaker Porsche is selling its 20.6% stake in Rimac Group and its 45% stake in the Bugatti Rimac joint venture (formed in 2021) to HOF Capital.
• Stalled talks: Ford and automaker Geely reportedly held talks about extending a European partnership into the U.S., though reports indicate these talks have stalled.
• Rivian production: EV manufacturer Rivian reported that its U.S. factory was hit by an EF-1 tornado that tore off part of the roof. Despite the damage, the company does not anticipate delays for its R2 SUVs, which are expected to reach customers in June.
• Other funding rounds: Autonomous vehicle maker A&K Robotics raised an $8 million CAD Series A round to develop airport vehicles in Vancouver, Canada. Power infrastructure provider Decade Energy raised €22 million in funding, and Silicon Valley-based autonomous aircraft startup Reliable Robotics raised $160 million. Meanwhile, autonomous trucking company PlusAI terminated its SPAC (Special Purpose Acquisition Company) merger with Churchill Capital Corp IX.
• Logistics and testing: Swedish startup Einride is adding 75 electric trucks to Amazon’s Relay freight network. In luxury automotive, Aston Martin is testing Apple CarPlay Ultra on its $205,000 Vantage Roadster.

Why it matters

Tesla’s admission that millions of vehicles require physical hardware upgrades for future Full Self-Driving capabilities introduces significant financial and logistical challenges for the company, including the potential need for microfactories. This physical upgrade process complicates Tesla’s autonomous vehicle timeline and could strain its capital expenditures.