Tesla Cuts CAPEX by $5 Billion... Concerns Over Future Growth Drivers Such as AI and Robotics

Expanding AI, robotics and autonomous driving businesses
Annual CAPEX target cut from $25 billion to $20 billion
Third-quarter investment also below expectations... shares fall

Tesla, the U.S. electric vehicle maker led by CEO Elon Musk, has decided to cut its capital expenditure (CAPEX) target for this year by more than $5 billion. Although the company has positioned artificial intelligence (AI), robotics and autonomous driving as future growth engines, concerns have emerged as its investment in the third quarter also fell well short of market expectations.

Elon Musk, CEO of Tesla, watches U.S. President Donald Trump speak at an event in Washington, D.C., on the 8th (local time). AP-Yonhap News

According to foreign media outlets, including Bloomberg and Business Insider (BI), on October 21 (local time), Tesla Chief Financial Officer Vaibhav Taneja said during the company's third-quarter earnings conference call that it was lowering its CAPEX target for this year from more than $25 billion to $20 billion. In January, when Tesla announced its fourth-quarter results for last year, it had raised its target from $20 billion to $25 billion.

The company did not explain the specific reasons for lowering its target. However, analysts say the reduction reflects both delays to some projects and an overall cut in planned investment. In fact, CEO Musk said he expects supply chain and design issues related to the development of the Optimus humanoid robot to be resolved around the end of next year.

Third-quarter investment also fell far short of market expectations. Tesla said its CAPEX for the period totaled $4.73 billion, about 40% below the expected $7.95 billion.

Tesla's third-quarter results slightly exceeded market expectations, but its weakening profitability stood out. Revenue declined just 0.2% year over year to $28.05 billion, while operating profit plunged 56% and net income fell about 43%. Adjusted earnings per share (EPS) came in at $0.48, above Wall Street's estimate of $0.44. Free cash flow (FCF) turned positive at $1.53 billion after posting a loss in the previous quarter, but analysts said the lower-than-expected CAPEX likely contributed to the result. FCF was also down 62% from a year earlier.

Some in the market viewed the investment cuts as a possible sign of delays to future growth. Amid these concerns, the stock fell about 3% in after-hours trading. It had closed up 3.41% in regular trading before the earnings announcement.

CEO Elon Musk stands beside U.S. President Donald Trump at the White House on May 30, 2025 (local time). Reuters-Yonhap News.

Harris Kourshid, chief investment officer at Karobar Capital, said, "A decrease in CAPEX is positive only if it does not undermine future growth." He added, "We need to determine whether the timing of investment spending has simply shifted, or whether scaling up the robotaxi and Optimus businesses is taking longer than expected."

As competition in the electric vehicle business intensifies, Tesla is restructuring its business around AI, robotics and autonomous driving. More than 75% of new vehicles delivered in North America in the third quarter included a subscription to FSD (Full Self-Driving), the company's driver-assistance software. Last month, Tesla launched the two-seat Cybercab autonomous vehicle and began deploying it in its existing robotaxi service. The company plans to expand its robotaxi service to Phoenix, Las Vegas, Jacksonville and San Antonio, among other cities. It did not disclose a specific launch schedule.

The possibility of a merger between Tesla and SpaceX also drew attention at the event. The interest followed CEO Musk's comments on the previous day during a SpaceX investor conference call that the two companies had formed a special committee to consider a potential merger. He said no agreement had been reached and that the deal could fall through, as it would require the support of a majority of Tesla shareholders.

A merger could also substantially increase Musk's personal wealth. Citing an analysis of its Billionaires Index, Bloomberg reported on October 21 that his fortune could rise by more than $110 billion (about 146 trillion won) if Tesla and SpaceX merge. The outlet also reported that Tesla stock compensation, which he can receive if he meets certain conditions by 2028, could vest early.

This content was produced with the assistance of AI translation services.