Some Thoughts On Elon Musk’s Emails To Employees — & The Media + Wall Street’s Response

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Last week, the world that follows Tesla flipped out a bit due to an Elon-to-staff email that got leaked. To be frank, there was nothing especially interesting in the email, which is why we didn’t cover it earlier. However, people keep referencing it in comments, and both the media and Wall Street blew it way the f*** out of proportion, so I’m addressing it this article.

There was another email to employees that got leaked a day or two later. Again, I think people should be cautious reading into that leaked email too much. So, I’ll briefly address that one as well.

Regarding the first email, rather than quote it directly, I’d like to take a shot at summarizing what it really said:

Hey, people of Tesla, I know you saw that we just raised a couple billion dollars, but don’t get complacent. Don’t take that to mean that you can throw money around carelessly. We still need to vigilantly look for ways to cut costs and become a more efficient company.

Just as a quick example to put this extra cash into perspective, if we had the same monthly rate of financial loss in future months as we had in Q1, the $2.4 billion we just raised would only last 10 months.

As before, to make the company as successful as possible, we need every employee to look for ways to cut costs and make Tesla more financially efficient than any other automaker on the planet.

(To strike the fear of God in your heart …) CFO Zachary Kirkhorn and I will be carefully reviewing expenses. So, really, watch your spending.

Your dank meme lord,
Elon

A comment from one of our readers, Mirio07, gets to the point even better:

Anyone running a large biz knows how hard it is for employees to continuously focus on cost reduction.

Elon seems to know how to get this done, he proofed it at SpaceX. His emphasis should be applauded, it’s the right move to go into the weeds if you want employees to actually take it seriously.

…

If the employee knows that the CEO might personally catch you wasting money, that will make you hyper vigilant to the cause since no colleagues will be able to cover for you.

A Tesla Motors Club forum member, Lycanthrope, put it even more succinctly: “I don’t think Elon will be checking many expenses, he’s just putting the fear of god into the employees…”

Elon has been focused on getting out of Wall Street’s grip for at least a few quarters now. The enormous number and obnoxiously loud voices of short sellers, the short-term interests of traders, and the foolish or purposefully deceitful echo chamber of the mainstream financial press pushed Elon (and many Tesla investors) to their limits. Elon decided that it was time to cut out Wall Street banks if they were going to be such a pain in the ass. But becoming more financially efficient and continuously profitable isn’t a walk in the park. Furthermore, if you’re going to do that and you’ve got a company of 45,000 or so employees, you have to push those staff members to have the same vision on the levels they can control. I imagine this email was pretty ideal for conveying that message to them.

Anyway, the core problem with the coverage of the email is that it took what seemed like a clear hypothetical (to me) and yet was covered widely as if Tesla was actually likely to run out of money in 10 months. The coverage was just stupid, in my opinion. Though, if the goal was to drive down Tesla’s stock price, it was effective.

Here’s the second email that got leaked:

Subj. Exciting Goal!
Date: May 22, 2019
To: Everybody

As of yesterday we had over 50,000 net new orders for this quarter. Based on current trends, we have a good chance of exceeding the record 90,700 deliveries of Q4 last year and making this the highest deliveries/sales quarter in Tesla history!

In order to achieve this, we need sustained output of 1,000 Model 3’s per day. Almost all parts of the Model 3 production system have exceeded 1,000 units on multiple days (congratulations!) and we’ve averaged about 900/day this week, so we’re only about 10% away from 7,000/week.

If we rally hard, we can do it!

Thanks for your hard work

This email got people quite excited, because the targeted deliveries for the quarter are much higher than Wall Street had been expecting* and much higher than in the first quarter of 2019. Record deliveries would essentially crush the widespread thesis that Tesla consumer demand is dropping. Well, it would crush that thesis for a few days. Afterward, it’s again anyone’s guess what the next quarter’s delivery total will be, and there will be widespread hype again among short sellers and obsessive critics that Tesla demand is drying up. (Word of mouth be damned.) So, this leaked email almost couldn’t be twisted to look bad and the Tesla stock price popped a bit on the news.

(*Side note: I fully expect that Wall Street manipulators and short sellers will adjust their delivery expectations based on these positive figures without really adjusting their Tesla stock price target. It will then be harder for Tesla to exceed expectations and again easier for smear campaigners to highjack the message following the next quarter’s sales report in order to try to say Tesla’s future no longer looks rosy. That is the narrative that short sellers make money on.)

Aside from my side note above, I encourage everyone to be cautious with targets and forecasts like this. It appears Tesla is still working to slowly increase production capacity, could still face numerous delivery hurdles before the end of the quarter, and might be more likely to deliver 74,000 or so vehicles in the quarter. Who really knows? Remember that Tesla is supposed to now be in the process of “unwinding” its wave-like delivery schedule — that might come with unexpected challenges. Additionally, even Elon Musk doesn’t know how many people will order Tesla vehicles tomorrow, next week, or next month.

Perhaps production and deliveries are booming and will boom through June and the rest of the year. Or maybe not. Tesla is in uncharted territory, and no one has a crystal ball. Or if they do, they don’t worry about things like auto sales, corporate profits, and weaselly short sellers.

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