CEO Elon Musk says new Tesla plants are ‘money furnaces’losing billions

Elon Musk said Tesla Inc.’s new factories. in Germany and Texas are losing “billions of dollars” as the electric vehicle maker tries to ramp up production.

“Both factories in Berlin and Austin are giant money kilns right now,” the CEO said in a video interview with Silicon Valley Tesla Owners posted online on Wednesday.

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The comments, part of a wider discussion filmed May 31, offer new insight into Tesla’s operations in the days leading up to Musk’s decision to cut costs by firing employees. The cuts will affect about 10% of Tesla’s salaried employees, or about 3.5% of the global workforce, over the next three months, Musk told Bloomberg News editor-in-chief John Micklethwait at the Qatar Economic Forum on Tuesday.

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Musk also said in the May 31 interview that Tesla is struggling to quickly ramp up Austin production of Model Y SUVs that use the company’s new 4680 cells and structurally integrated battery pack. To keep up with the high demand for its cars, the company said in an April letter to shareholders that it would also make Model Y SUVs with the older 2170 cells in Austin — but the tools needed to do so got stuck. in China, Musk said.

“This will all be resolved very quickly, but it will require a lot of attention, and it will take more effort to get this plant into high volume production than it took to build it in the first place,” Musk said of the Austin plant. Berlin is in a “slightly better position” because Tesla has equipped it to build cars with the 2170 cells, he said.

In recent years, Tesla has prioritized building new factories in various locations around the world to make it cheaper to distribute cars in the largest markets. More factories are also giving Tesla a higher cap on the number of cars it can build per year.

Tesla’s struggle to get the Austin and Berlin plants operational came as the automaker also faced Covid-related lockdowns at its Shanghai factory, Musk said. At the time of last month’s interview, Tesla was still trying to recover from a dramatic production decline due to Chinese government restrictions, as well as lingering supply chain headaches.

“The past two years have been an absolute nightmare of supply chain disruptions, one after the other, and we’re not over it yet. Our biggest concern is how we can 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 partially cited the disruptions in China on Wednesday as he lowered his price target for the automaker from $1,300 to $1,200 a share. He maintained his overweight rating on Tesla.

Shares of Tesla closed less than 1% to $708.26 on Wednesday in New York.

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