To have more money, you can earn it or decline to spend it. It seems as if Elon Musk is leaning toward the second choice these days. On Friday, Tesla Technoking Elon Musk urged employees to focus on “minimizing cost of deliveries” rather than expediting deliveries of cars to customers to hit end-of-quarter goals. Typically, the company had pushed employees to hit delivery objectives, which involved overtime labor and other enhanced costs. Instead, Elon’s email says that Tesla will seek opportunities to reduce the cost of deliveries.
Tesla stock prices surged 5% upon return from the US Thanksgiving holiday weekend.
Let’s Not “Sprint Like Crazy” Anymore
Elon’s email to employees came via a company-wide email. Here it is, as transcribed by CNBC:
From: Elon Musk
Subj. Q4 deliveries vs. cost efficiency
Date: Nov. 26, 2021 [time stamp redacted]
Per my email several weeks ago, our focus this quarter should be on minimizing cost of deliveries rather than spending heavily on expedite fees, overtime and temporary contractors just so that cars arrive in Q4.
What has happened historically is that we sprint like crazy at end of quarter to maximize deliveries, but then deliveries drop massively in the first few weeks of the next quarter. In effect, looked at over a six month period, we won’t have delivered any extra cars but we will have spent a lot of money and burned ourselves out to accelerate deliveries in the last two weeks of each quarter.
We will still have quite a big wave of deliveries in the last few weeks of December, as we don’t yet have high volume production either in Europe or Texas, which means a lot of cars on boats from China to Europe and on trucks [and/or] rail from California to the East Coast arriving late in the quarter, but this is nonetheless the right time to start reducing the size of the wave in favor of a steadier and more efficient pace of deliveries.
The right principle is take the most efficient action, as though we were not publicly-traded and the notion of “end of quarter” didn’t exist.
Rather than follow what had become a company pattern of “spending heavily” in the proximity of quarterly earnings reports, the company will now turn to a “steadier and more efficient pace of deliveries.” Doing so will reduce the “expedite fees,” “overtime,” and “temporary contractors,” which have caused the company to spend “a lot of money.” Musk conceded that the company had “burned ourselves to accelerate deliveries in the last two weeks of each quarter.”
Instead, the company would change momentum so that, no longer in the run-up to earnings, would they “sprint like crazy.” Deliveries, it turns out, “drop massively in the first few weeks of the next quarter,” so now Tesla will endorse the “right principle (which) is to take the most efficient action.”
Switching the tone of the email blast to a positive feel, Elon Musk indicated that there is an expected “big wave of deliveries in the last few weeks of December.” With “a lot of cars on boats from China to Europe” and on “rail from California to the East Coast,” the Tesla future continues to look bright. Other good news is to come, too, when the company accesses “high volume production” in Europe or Texas. It is the “right time to start reducing the wave,” Musk expressed, and admonished his employees to conduct themselves “as though we were not publicly-traded and the notion of ‘end of quarter’ didn’t exist.”
Giga Berlin is Nearly Ready to Begin Production
Automobilwoche explained Monday that Tesla’s new manufacturing facility in that country will start production in December. The article also related that Tesla is foregoing possible government funding in the billions for the planned battery production in the Gigafactory in Grünheide near Berlin. The Federal Ministry of Economics and Tesla announced this change of status on Friday at the request of the German Press Agency. “However, Tesla is sticking to its plans for the battery and recycling factory in the Gigafactory Berlin-Brandenburg but is foregoing the state IPCEI funding,” the media outlet assured its audience.
The project is considered to be one of the most important industrial construction efforts right now in East Germany. Tesla Berlin will begin to supply European demand, which would free up production at its California and Shanghai plants as well as cut transport costs on its German vehicles.
Barrons reports that a new Tesla giga press — a diecasting machine that “promises to upend automotive manufacturing” — is almost ready to go in the Berlin shop.
Tesla Orders Continue to Pour In, Even after Elon’s Email
Elon Musk’s leaked email to employees comes at a time when Tesla and other automakers are confronting parts shortages, port constraints, and higher shipping costs. Due to supply chain limitations, some Tesla customers have experienced months-long delivery delays. (Note: My own Tesla Model Y arrived in late November 2021, about 3 full months after I placed the order.) So, too, have other automakers, of course, been impacted by current shipping dilemmas. New automaker-on-the-block Rivian notified reservation holders that, rather than the original January delivery dates, it is likely to be March or April before their vehicles get delivered to customers.
Nonetheless, Tesla sales continue to rise, supported by positive new customer testimonials. Tesla wasn’t the only company that had its US sales indicate company growth patterns, but it was one of few, and it was far above the others. Tesla US Q3 2021 sales were up 67% YTD over 2020 and were up 104% YTD over 2019, with 627,350 vehicles delivered to date in 2021.
Tesla is expecting to grow by 50% and even surpass that number, possibly as soon as within the next two years. This upward climb is in both in volume and in revenue while steadily increasing margin. Such projections are based on the reframing of Model Y production. If Model Y production in Fremont can be halted, room would be created to emulate the Model S & X production lines — a complete redesign and rebuild to a higher capacity.
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