‘Gigantic money furnaces’: Elon Musk says Tesla’s new car factories are ‘losing billions of dollars’

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Tesla Inc.’s new factories in Texas and Germany, according to Elon Musk, are losing “billions of dollars” as the electric car manufacturer strives to increase output. The CEO said as much in a video chat with Tesla Owners of Silicon Valley that was uploaded online on Wednesday. “Both Berlin and Austin facilities are big money burners right now,” he added. The remarks, which were recorded as part of a larger meeting on May 31, provide fresh information about Tesla’s operations in the days before Musk decided to reduce expenses by firing workers.

At the Qatar Economic Forum on Tuesday, Musk told Bloomberg News Editor-in-Chief John Micklethwait that the layoffs would touch around 10% of Tesla’s paid employees over the course of the next three months or approximately 3.5% of its worldwide staff. The Model Y SUVs, which use the company’s new 4680 cells and structurally integrated battery pack, have been a challenge for Tesla to produce in Austin, according to Musk in the May 31 interview.

The business said in an April letter to shareholders that it will also produce Model Y SUVs in Austin using the older 2170 cells to meet up with the enormous demand for its vehicles, but Musk claimed the equipment needed for that got stalled in China.

The Austin facility, according to Musk, will need more work to get it up to high volume production than it did to create it in the first place. “This is all going to be corrected pretty soon, but it takes a lot of attention,” Musk added. Berlin is in a “significantly better situation,” according to him since Tesla set it up to produce vehicles with 2170 cells.

To make it more affordable to distribute vehicles in its largest markets, Tesla has spent the past several years putting a priority on developing additional plants in various places across the globe. Additionally, more plants increase Tesla’s annual production capacity by a certain amount.

In addition to dealing with lockdowns linked to Covid at its Shanghai facility, Musk claimed Tesla struggled to get the plants in Austin and Berlin up and running. When we spoke to Tesla last month, the company was still dealing with a severe production decline imposed on by Chinese government restrictions as well as ongoing supply-chain issues.

We’re still experiencing supply-chain disruptions from the last two years, which have been an utter nightmare. Our first issue is how to maintain the plants so that we can continue paying our employees and avoid bankruptcy, according to Musk.

The Covid shutdowns in China were “to put it mildly, very, very tough.” Tesla’s output at its Chinese facility has more than quadrupled since the interview. On Wednesday, Adam Jonas of Morgan Stanley dropped his price forecast for the manufacturer from $1,300 to $1,200 a share, mostly due to the interruptions in China. He still received a Tesla overweight rating. On Wednesday in New York, Tesla’s shares decreased by less than 1% to $708.26.

Source: Business Standard

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