Tesla Inc.’s manufacturing plants in Germany and Texas were called “gigantic money furnaces” by none other than Elon Musk himself after incurring billions worth of expenses due to supply-chain disruptions and battery-cell manufacturing challenges.
“Both Berlin and Austin factories are gigantic money furnaces right now,” said Tesla CEO Elon Musk in an interview with Tesla Owners Silicon Valley on Wednesday. “Berlin and Austin are losing billions of dollars right now because there’s a ton of expense and hardly any output.”
The Tesla CEO has cited supply-chain issues as being one of the biggest hurdles facing manufacturing.
“Overwhelmingly, our concern is, how do we keep the factories operating so we can pay people and not go bankrupt,” Musk posited.
Analysts expect Tesla to deliver roughly 273,000 vehicles in the second quarter, according to data provided by FactSet, down from around 310,000 in the first three months of the year. If true, this would mark the company’s first quarter-over-quarter decline in deliveries in more than two years.
The Texas plant, which Tesla designed to be able to make cars using batteries of different sizes, has been caught in the middle of various macro-economic challenges, including higher supplier and logistics costs, soaring inflation, and China’s zero-tolerance policy for coronavirus infections, which has resulted in multiple city-wide lockdowns.
“Increasing in-house production of the larger battery cells and associated packs has proven challenging,” said Musk. “Meanwhile, the tooling required to make cars using smaller battery cells was stuck in China.”
According to Musk, the company’s Texas plant has only been able to manufacture a limited number of vehicles. He cited challenges with the production of the 4680 battery, as well as port delays in China that have affected the shipment of key goods.
“Our constraints are much more in raw materials and being able to scale up production,” Musk said in an interview with Bloomberg at the Qatar Economic Forum. “As anyone knows who has tried to order a Tesla, the demand for our cars is extremely high, and the wait list is long. This is not intentional, and we’re increasing production capacity as fast as humanly possible.”
Earlier this week, Musk said Tesla was planning to cut 10% of the company’s salaried employees to make up for missed growth projections.
“We grew a little too fast in some areas,” he told Bloomberg.
The decision came after Musk said the U.S. was probably in a recession that could last 18 months.