Tesla Factories In Texas, Germany Losing Billions Of Dollars, Says Elon Musk

Car factories for Tesla in Austin, Texas and Germany are “gigantic money furnaces right now” and losing billions, says Elon Musk

Elon Musk has said Tesla’s new car factories in Texas and Germany are “losing billions of dollars” and are “gigantic money furnaces”.

The shocking comments from the Tesla CEO came in the third part of an interview published on Wednesday, Reuters reported.

During the interview with the Tesla Owners Silicon Valley, which was actually recorded on 30 May, Musk also admitted that Covid shutdowns of its Shanghai factory is another major concern for the world’s most valuable car maker.

Tesla's Gigafactory 3 in Shanghai. Image credit: Tesla
Tesla’s Gigafactory 3 in Shanghai. Image credit: Tesla

Cash burn

Musk explained that supply chain disruptions are badly hampering the ability of Tesla to ramp up production.

“Both Berlin and Austin factories are gigantic money furnaces right now. Okay?” he said. “It’s really like a giant roaring sound, which is the sound of money on fire.”

“Berlin and Austin are losing billions of dollars right now because there’s a ton of expense and hardly any output,” he added. “Getting Berlin and Austin functional and getting Shanghai back in the saddle fully are overwhelmingly our concerns. Everything else is a very small thing basically.”

According to Musk, Tesla’s Texas factory produces a “tiny” number of cars because of challenges in boosting production of its new “4680” batteries and tools to make its conventional 2170 batteries are “stuck in port in China.”

He reportedly said its Berlin factory is in a “slightly better position” because it started with using the traditional 2170 batteries for cars built there.

According to Reuters, Musk said the Covid-19-related shutdowns in Shanghai “were very, very difficult.”

The shutdown affected car production not only at Tesla’s Shanghai factory, but also at its California plant, which uses some vehicle parts made in China, he said.

Tesla reportedly plans to suspend most production at its Shanghai plant in the first two weeks of July to upgrade the site to boost output, according to an internal memo seen by Reuters.

“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,” Musk reportedly said.

Tesla’s overwhelming concern, he said, is “How do we keep the factories operating so we can pay people and not go bankrupt?”

This is not the first time that Musk has worried about Tesla finances.

In November 2020 Musk admitted that Tesla in mid 2017 in serious danger of running out of money and having to declare itself bankrupt.

Job losses

Meanwhile Elon Musk is already cutting costs at the car maker.

Earlier this month Musk told Tesla executives in an email that he had a “super bad feeling” about the economy and planned to cut headcount by 10 percent and “pause all hiring worldwide.”

The world’s most valuable carmaker employs roughly 100,000 staff, and a 10 percent workforce reduction could see as many as 10,000 people being let go.

Earlier this week Musk confirmed a 10 percent cut in salaried staff at Tesla will occur over three months.

At the same time Tesla was sued by two former staff who say the company broke the law in laying them off, along with about 10 percent of Tesla’s workforce, without notice required by federal law.

The two workers, John Lynch and Daxton Hartsfield, said they worked at Tesla’s battery plant near Reno, Nevada, for about five years before being laid off this month without notice.

The two said in the suit they were among more than 500 employees at the facility to be let go.

Speaking at the Qatar Economic Forum, Musk reportedly called the lawsuit “trivial”.

He said the “pre-emptive” lawsuit “has no standing” and that “anything related to Tesla gets a lot of clicks, whether it is trivial or significant”.

“I would put that lawsuit you’re referring to in the trivial category,” he reportedly said.