New Tesla factories are “money furnaces” that are losing billions: Tesla CEO Elon Musk

The Model Y SUVs, which utilise 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.

Tesla Inc.’s new plants in Texas and Germany, according to Elon Musk, are losing “billions of dollars” as the electric vehicle manufacturer strives to increase output.

The CEO stated as much in a video chat with Tesla Owners of Silicon Valley that was uploaded online on Wednesday. “Both Berlin and Austin factories are gigantic money furnaces right now,” he added.

The remarks, which were recorded as part of a larger discussion 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 informed Bloomberg News Editor-in-Chief John Micklethwait that the layoffs will touch roughly 10% of Tesla’s salaried employees over the course of the next three months, or approximately 3.5% of its global staff.

The Model Y SUVs, which utilise 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 announced 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 cars, but Musk said the tooling needed for that got stalled in China.

“This is all going to get fixed real fast, but it requires a lot of attention, and it will take more effort to get this factory to high volume production than it took to build it in the first place,” Musk said of the Austin factory. Berlin is in a “significantly better situation,” according to him, because Tesla set it up to produce vehicles with 2170 cells.

To make it more affordable to distribute cars in its largest markets, Tesla has spent the last several years putting a priority on developing additional plants in various locations across the world. 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 factories 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.

“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. Overwhelmingly our concern is how do we keep the factories operating so we can pay people and not go bankrupt,” Musk said. “The Covid shutdowns in China were very, very difficult, to say the least.”

Tesla’s production at its Chinese plant has more than tripled 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.