In an interview with the Tesla Owners of Silicon Valley club, in May, CEO Elon Musk told them that the factories in Austin, Texas, and Berlin, Germany, “are losing billions of dollars.” The interview was only released today. Musk blames the problems on the ongoing COVID problems in China, where its batteries and other components are manufactured. Could Tesla be going bankrupt?
“How do we not go bankrupt?”
“Both Berlin and Austin factories are gigantic money furnaces right now,” Musk said. “Okay? It’s really like a giant roaring sound, which is the sound of money on fire.” Musk said his biggest concern is, “How do we keep the factories operating so we can pay people and not go bankrupt?”
Tesla has only been producing vehicles at the Texas and Berlin factories since the beginning of 2022. The new 4680 battery is manufactured in Texas, but production has been slow to ramp up. And the tooling for 2170 batteries “are stuck in a port in China.” The factory in Shanghai, China, has been plagued with shutdowns over the spread of COVID there.
Production at all Tesla factories affected
Those shutdowns in Shanghai “were very, very difficult.” He says these issues will be corrected soon, but they take “a lot of attention.” The Berlin factory is seeing better production because it started using the 2170 batteries from the beginning. But ramping up production in both Texas and Berlin has been slow.
Musk’s comments come as the company is shedding its staff by 10 percent. The company will also freeze hiring worldwide for the immediate future. “The past two years have been an absolute nightmare of supply chain interruptions, one thing after another, and we’re not out of it yet,” he said. The layoffs will be spread out over three months.
Shanghai plant closing for two weeks
All of this is also affecting production at its Fremont, California, factory as well. A number of components used for production there come from China. To set the company up for better production in China, the plant will close for two weeks in July. Then, the plants will see upgrades to help increase output according to Reuters.
Tesla has continued to increase prices across the board numerous times in 2022 to counter the increase in raw materials and components. But that also adds a few billion to the company’s bottom line. Still, it isn’t offsetting the problems he and really all manufacturers are facing right now. With recession fears looming, there is also concern that demand for vehicles will start declining as potential buyers tighten their belts.
But there is some semi-good news. Musk said Cybertruck production should begin in mid-2023.