Elon Musk says Tesla’s new factories are ‘money furnaces’ losing billions
Elon Musk said Tesla Inc.’s new factories in Germany and Texas were losing “billions of dollars” as the electric vehicle maker tried to ramp up production.
“The factories in Berlin and Austin are currently gigantic furnaces of money,” the CEO said in a video interview with Tesla owners in Silicon Valley posted online Wednesday.
The comments, part of a larger discussion filmed on May 31, offer new insight into Tesla’s operations in the days leading up to Musk’s decision to cut costs by laying off employees. The cuts will affect about 10% of Tesla workers over the next three months, or about 3.5% of its global workforce, Musk told Bloomberg News editor John Micklethwait at the Economic Forum on Tuesday. from Qatar.
Musk also said in the May 31 interview that Tesla had struggled to quickly ramp up production in Austin of Model Y SUVs that use the company’s new 4680 cells and structurally integrated battery. To meet strong demand for its cars, the company said in an April letter to shareholders that it would also manufacture Model Y SUVs with the old 2170 cells in Austin – but the tooling needed for this has remained stuck in China, Musk said.
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“Everything is going to be fixed very quickly, but it requires a lot of attention, and it will take more effort to get this plant to high-volume production than it took to build it in the first place,” said Musk said of Austin. factory. Berlin is in a “slightly better position” because Tesla has equipped it to build cars with 2170 cells, he said.
Tesla has spent the past few years prioritizing building new factories in different locations around the world to make it cheaper to distribute cars in its biggest markets. More factories also give Tesla a higher cap on the number of cars it can build per year.
Tesla’s struggles to operate factories in Austin and Berlin came as the automaker also faced Covid-related lockdowns at its Shanghai plant, Musk said. At the time of last month’s interview, Tesla was still trying to recover from a dramatic drop in production caused by Chinese government restrictions, as well as ongoing supply chain headaches.
“The past two years have been an absolute nightmare of supply chain disruptions, one thing after another, and we’re not out of it yet. Our main concern is how do we keep the factories running so we can pay people and not go bankrupt,” Musk said. “The Covid shutdowns in China have been very, very difficult, to say the least.”
Since the interview, Tesla has more than tripled production at its factory in China.
Morgan Stanley analyst Adam Jonas cited the disruption in China in part on Wednesday as he lowered his price target on the automaker to $1,200 per share from $1,300. He maintained his overweight rating on Tesla.
Shares of Tesla closed less than 1% at $708.26 on Wednesday in New York.