CEO Elon Musk: New Tesla plants are ‘money furnaces’ losing billions.

Tesla has struggled to ramp up production of Model Y SUVs in Austin, which use the company's new 4680 cells and structurally integrated battery pack.

CEO Elon Musk

Elon Musk said Tesla Inc.’s new plants in Germany and Texas are losing “billions of dollars” as the electric-vehicle maker tries to ramp up production.“Both Berlin and Austin factories are gigantic money furnaces right now,” the chief executive officer said in a video interview with Tesla Owners of Silicon Valley posted online Wednesday.

The comments, which were recorded as part of a discussion on May 31, provide new insight into Tesla’s operations in the days leading up to Musk’s decision to cut costs by laying off employees. The layoffs will affect about 10% of Tesla’s salaried workers or about 3.5 percent of the company’s global workforce, Musk told Bloomberg News Editor-in-Chief John Micklethwait at the Qatar Economic Forum on Tuesday.

Musk also stated in the May 31 interview that Tesla has struggled to ramp up production of Model Y SUVs in Austin, which use the company’s new 4680 cells and structurally integrated battery pack. To meet the high demand for its vehicles, the company said in an April letter to shareholders that it would also manufacture Model Y SUVs in Austin using older 2170 cells – but the tooling for that got stuck in China, Musk said

.“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 “slightly better position” because Tesla outfitted it to build cars with the 2170 cells, he said.

Tesla has spent the last few years prioritising the construction of new factories in various locations around the world to reduce the cost of distribution in its largest markets. More factories also allow Tesla to increase its annual production capacity.

Tesla’s difficulties in getting the Austin and Berlin factories up and running coincided with the automaker’s dealing with Covid-related lockdowns at its Shanghai plant, according to Musk. At the time of the interview last month, Tesla was still trying to recover from a significant drop in production caused 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 has more than tripled production at its China plant since the interview.

Morgan Stanley analyst Adam Jonas lowered his price target on the automaker to $1,200 per share on Wednesday, citing China disruptions in part. He kept his overweight rating for Tesla.

Tesla’s stock fell less than 1% to $708.26 in New York on Wednesday.


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