Tesla Boosts Spending Plan to $25 Billion for AI, Robot Push

Tesla Inc. anticipates billions of dollars in additional spending this year to support Elon Musk’s ambitions to transform the electric vehicle pioneer into an artificial intelligence and robotics company.Author of the article:You can save this article by registering for free here. Or sign-in if you have an account.(Bloomberg) — Tesla Inc. anticipates billions of dollars in additional spending this year to support Elon Musk’s ambitions to transform the electric vehicle pioneer into an artificial intelligence and robotics company.Subscribe now to read the latest news in your city and across Canada.Subscribe now to read the latest news in your city and across Canada.Create an account or sign in to continue with your reading experience.Create an account or sign in to continue with your reading experience.Capital expenditures this year will exceed $25 billion, the company disclosed along with its earnings Wednesday, roughly three times last year’s outlay. The planned investment is up from a prior forecast of around $20 billion.“You should expect to see a very significant increase in capital expenditure,” Musk said on a conference call with analysts. Tesla shares erased after-hours gains following the comments and fell as much as 3.3% before the start of regular trading Thursday.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.The investments will be put toward a dramatic expansion of factory operations, including production of Optimus humanoid robots, AI initiatives and the autonomous Cybercab. Tesla’s traditional auto business has declined the past two years, putting greater pressure on the planned pivot to those futuristic initiatives.The revised spending plan shows the heavy cost for Tesla to achieve its goals, said Dec Mullarkey, managing director at SLC Management. It’s “sobering up the assessment of free cash flow potential for the year.”In the first quarter, adjusted earnings rose to 41 cents a share, Tesla said, beating the 34-cent average of analyst estimates compiled by Bloomberg. That marked the second straight quarter of better-than-expected results.The release offered promising updates on Tesla’s core automotive business. The company reported seeing “continued growth in demand” for its vehicles in parts of Asia and South America, along with a rebound in North America, Europe and the Middle East.The surprisingly optimistic comments came weeks after the automaker reported lower-than-expected vehicle sales to start the year. The first quarter was the second-worst for auto deliveries since mid-2022, trailing only the year earlier period, when Tesla paused production of Model Y SUVs and dealt with widespread backlash to Musk’s political activities.The report “confirms that while the legacy EV business is no longer growing rapidly, it’s stable enough to fund Tesla’s heavy investments in robotics and self-driving technology,” Andrew Rocco, a Zacks Investment Research analyst, said in a note.Tesla pointed to rising gas prices as a boon for its business, driving increased customer interest.“We have seen a slight growth in terms of quarter-over-quarter deliveries on the order backlog front,” Chief Financial Officer Vaibhav Taneja said on the conference call.Tesla will be boosting vehicle output as part of its capital expenditure plan, Musk said. The company is “laying the groundwork for what we expect to be a significant increase in vehicle production in the future,” the chief executive officer said.For the first three months of 2026, however, Tesla spent less than $2.5 billion — well below the outlay the company will need to average per quarter to reach its expenditure forecast for the year. This contributed to Tesla posting $1.4 billion in positive free cash flow for the quarter, far better than analysts’ expectation that the carmaker would burn through almost $1.9 billion.Tesla’s energy division reported revenue of $2.4 billion in the first quarter, a 12% drop from a year earlier. The company didn’t provide detail as to why growth stalled at the unit, which had been a bright spot for the last several years, beyond Taneja saying that the energy storage business is “inherently lumpy.” Tesla still expects energy deployments this year to be up from 2025.The EV maker reiterated plans for the nascent ride-hailing business it calls Robotaxi, saying it’s on track to expand to Phoenix, Miami, Orlando, Tampa and Las Vegas in the first half of this year. Originally envisioned as a driverless service, Robotaxi launched with human safety monitors on board in Austin last year and has slowly expanded since then. It also launched this month in Houston and Dallas.While the company hasn’t provided details about fleet sizes, or disclosed how many vehicles operate without a safety monitor on board, the ramp remains slow, and Musk said it likely will not see material revenue until at least 2027.Tesla said it remains on track to start making key products including Cybercab, Semi and an updated version of its Megapack battery storage system.The spending needed to support production “increases near‑term cash burn and execution risk, but can be a long‑term positive for the stock,” said Ivan Feinseth, chief investment officer at Tigress Financial Partners. “Investors may increasingly view it as an AI compute and robotics infrastructure platform rather than just an automaker.”—With assistance from Andrea Chang.(Updates with early share trading in the third paragraph.)Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information.