Why Tesla is building a humanoid robot

Grace O’Donnell·Assistant EditorThu, January 27, 2022, 1:39 PM·3 min readIn this article:

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Tesla (TSLA) CEO Elon Musk raised eyebrows on Wednesday during the electric vehicle maker’s quarterly earnings call when he touted the development of the Optimus humanoid robot.

“I think that, actually, the most important product development we’re doing this year is actually the Optimus humanoid robot,” Musk said. “This, I think, has the potential to be more significant than the vehicle business over time.”

Musk unveiled the concept for the Optimus humanoid robot last August, which entailed a person in a skin suit performing a dance routine on-stage. At 5-foot-8 inches tall and 125 pounds, it’s intended to do menial labor tasks and would likely be deployed in Tesla factories.

“The foundation of the economy is labor,” Musk said Wednesday. “Capital equipment is distilled labor. So what happens if you don’t actually have a labor shortage? I’m not sure what an economy even means at that point. That’s what Optimus is about.”

Tesla's concept for its Optimus bot. (Tesla)
Tesla’s concept for its Optimus bot. (Tesla)

Though some see the robot as another distraction being touted by Tesla’s enigmatic CEO, some analysts agreed that a functional factory robot could eventually relive labor demands involved in building cars.

“We’re in a very tight labor market right now across the economy and across our entire coverage universe,” Oppenheimer Senior Research Analyst Colin Rusch said on Yahoo Finance Live (video above). “And so anywhere where we’re seeing savings around labor rates or, you know, just efficiency within operations, there’s a lot of value release.”

Wedbush Managing Director of Equity Research Dan Ives echoed the sentiment, telling Yahoo Finance in an email: “Robots will be in the Tesla factory over the coming years — a real business use with labor shortages abound and growing.”

Rusch added that “there’s an enormous opportunity around automation. We’re continuing to do an awful lot of work in our research franchise around this. And the form factor with the robot is interesting. I think they’re very early. Obviously, Elon likes to talk about things early in the cycle. You know, and so there’s a lot of work to do here.”This content is not available due to your privacy preferences.Update your settings here to see it.

‘The company is really built on engineering and innovation’

The question regarding whether Tesla is more of an auto company or a tech company has been a debate for years.

“The company is really built on engineering and innovation,” Rusch noted. “And the learning that they’ve done in and around cars really has applicability in other areas. And it’s interesting to see them move into that form factor. We’re certainly not giving them any credit or any value around that robot.”

And while “there was probably some disappointment from certain investors that they were talking about it just as a potential distraction for the organization or on their core business,” Rusch added, robots and automation are “important technology. We think it’s going to become a bigger and bigger issue as we get into the back half of the decade. And we’ll see what they come up with.”

At the same time, Tesla’s blowout fourth-quarter earnings results showed that the company was executing on its mission to build electric vehicles. This content is not available due to your privacy preferences.Update your settings here to see it.

“If you look at the fundamentals, and the profitability, and the story at Tesla, I think the golden goose for them continues to be going after the EV market and gaining more and more of that advantage,” Ives said on Yahoo Finance Live after Tesla reported earnings.

Furthermore, while the Optimus robot won’t be reducing labor costs anytime soon, Tesla seems focused focused on reducing costs in other areas.

“It’s important to think about what’s going to drive earnings for this company over the next few years, and a lot that is really related to cost,” Rusch said, citing Tesla’s simplification of car design and improvements in production. “They’re continuing to swim out in front of folks in terms of designing cost out of their system. We think that serves them awfully well over time.”

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