Hold on. Musk manages cash flow like no other businessperson of whom I am aware. He's superior. But like any startup founder, he does not necessarily manage to maximize free cash flow in the short or medium term. If he believes that there is an opportunity available and his pocketbook allows, he will ramp up spending, FCF be damned. And P/L doesn't even cross his mind.
In the Q3 earnings call, it seemed clear that Musk and the CFO were indicating that FCF is being sacrificed for the greater opportunity in AI. So trying to evaluate Tesla as of today mostly through the lens of FCF may make you unduly pessimistic as to how the company is executing. I thought they were warning that we might not like the next few FCF prints.
The primary problem in your post is the word "maximize". Neither I nor Mr musk have, IIRC, ever used that word with reference to Free Cash Flow or, I think, any other major topic. The problem in using that word is that it takes explicitly that FCF is the primary objective above all other factors. With rare possible exceptions such an assertion is not valid. In any business, including Tesla, there are multiple competing objectives that must to be optimized. That is to say among those objectives the relative priorities depend on multiple factors.
Anyone who has done startups and/or run established businesses understands intuitively that no single objective, except survival, reaches the level of 'maximizing' any factor.
So, that being true, why harp so much on Free Cash Flow? As one of my startup colleagues ones told me, "for shorthand we all need to have a single 'measure of merit' that alerts us to search for causality". That search for causality is the thing that helps find why a problem might be happening.
Specifically for Tesla we should all know that first quarter 2024 will have reduced Free Cash Flow. Why do we know that? The cause is clear. The Suez Canal is no longer safe for transportation between Shanghai and European destinations. That means the time in transit for anything at all moving between China and Europe will take, typically, an extra 10 days. That already has increased shipping costs as well as slower time in transit. That alone will significantly reduce Free Cash Flow. Since we already know Tesla German production has stopped for two weeks due to those shipping problems we also know FCF will decline due to lost sales, NOT accompanied by commensurately lower operating expenses.
When Elon suggests there might be 'breakeven FCF' in the near future almost everyone thought of price reduction as the culprit. Nearly nobody has thought of the impact from the Suez canal. Why? Precisely because analysis's and many others do not think of 'root cause', just remaining with whatever prejudgements they have already made. Elon, whatever his defects may be, cannot be described as superficial about core business operations. He is acutely aware of the role geopolitical factors (e.g. armed conflict) have on Tesla.
Given all that we also should know that aggressive efforts to reduce cost of finished goods are continuing and logistics, as a core Tesla competence, is obsessively searching for better solutions. Among those things few are a critical as cell and pack production. A careful look shows that Panasonic, BYD, CATL and Tesla itself are exerting major efforts to increase cell and pack production. Those are all working towards reduced cost, increased cell performance by all metrics, and similar reduced weight and improved performance at pack level. Why now, in the midst fo FCF discussion, raise this issue? Not simple but fundamental. Reduced weight and improved performance at pack level allows a virtuous process wherein ever gram of reduced weight reduces cost of many components. Few single items can match the cash flow improvement that comes from reducing vehicle weight.
Putting that in context the move to 48v architecture has many benefits, reducing cost is one obvious one, but losing all that copper not only reduces cost but reducing the weight also makes the entire vehicle lighter, so reduces many component stresses, not least for suspension. All that will be reflected in future FCF.
Next, moving towards improved delivery logistics by automating nearly all the delivery process reduces employees needed in the delivery process and speeds the entire process. That time saving also is reflected in FCF, by, say, a half day reduction in cash realization from sales.
There are two other crucially important but rarely mentioned issues. First, Megapack sales have improved cash flow by their constant improvements in packaging including increased pack sizes. Those allow installation and operation much more quickly that was previously possible. That improves FCF per unit at a major rate, enhanced by the expectation of more Megapack production sites. Not often mentioned, mostly because TE is not often evaluated in FCF terms. The second component is energy services, including Supercharger revenue, Megapack servicing, subscriptions and Virtual Power Plants/grid services. None of those are disclosed in line items. Thus they are easy to ignore. All of those generate FCF on an ongoing basis while simultaneously having very low marginal cost. I don't mention merchandise sales because those are not significant thus far.
So, the reality is the Free Cash Flow is the summary of all those things and more. By itself, the message of FCF changes is that they should point towards a 'passionate search for causality'. That phrase was in my own PhD thesis in another context. What it means is that a single 'measure of merit' serves as an alert to understand why, rather than an end in itself.
Integrity cannot be superficial, not can be our understanding of an investment.