Tesla's New US And German Factories Are Causing Billions Of Dollars In Losses

Affected by the epidemic and the supply chain, Tesla's new car factories in Texas, USA and Berlin, Germany are suffering billions of dollars in losses.

Elon Musk even said in an interview, "The Berlin and Austin factories are now huge melting pots of money. It's as if they're literally making a huge roar, the sound of money burning."

Elon Musk: The new factories are "giant money furnaces"

Tesla CEO Elon Musk recently said that Tesla's new car factories in Texas and Berlin, Germany, are causing "billions of dollars of damage" because they are struggling to increase production due to battery shortages and disruptions in the supply of battery manufacturing tools, Reuters reported on June 22.

In an interview with Tesla Owners Silicon Valley in Austin, Texas, on 31 May, Musk reportedly said: "The Berlin and Austin factories are both huge melting pots of money right now. It's like they're literally making a huge roar, the sound of money on fire."

Elon Musk said that car production at the Texas plant was "minimal" because of difficulties in increasing production of the 4680 battery, while the supply of the facility that makes the 2170 battery was hampered. The Berlin plant, on the other hand, is in a slightly better position, as it started out with locally produced 2170 cells. "The last two years have been an absolute nightmare of supply chain disruption, one thing after another, and we're not out of the woods yet." Musk said.

"The Shanghai outbreak caused Tesla very great difficulties, and the two-month-long shutdown affected production not only at the Shanghai plant, but also at the US plant in California, as some car parts made in China are also used overseas."

"The last two years have been an absolute nightmare of supply chain disruption, bad news after bad news, and we still haven't gotten over it." Musk said the toughest challenge for Tesla this year, is how to keep the frontline factories running, and at current labour costs, a prolonged shutdown would mean huge losses or lead to potential bankruptcy.

Since the beginning of last year, Tesla car delivery deadlines have been constantly delayed, with official figures shown increasing from weeks all the way to large dozens of weeks, with an average wait of around six months for a car to be mentioned. The situation abroad will be even tougher, with orders from last year likely to wait until August or September of this year to pick up their cars, with some even lined up for 2023.

Earlier this month, Elon Musk said he had a "super bad feeling" about the current economic situation and said Tesla would need to cut its workforce by about 10 per cent and "suspend all hiring activities globally".

Elon Musk recently explained the layoffs at the Qatar Economic Forum, saying that they would only apply to regular salaried workers and that hourly workers would not be affected by the cuts. Tesla's total workforce will be reduced by around 3.5% and the move will be completed within the next three months. Elon Musk called it a "not too big" change.

It is expected that Tesla's deliveries in the second quarter may be lower than in the first quarter, or the first year-on-year decline in deliveries in more than two years. In the first quarter of this year, Tesla delivered 310,100 units, up 68% year-on-year.

The importance of the Shanghai plant continues to grow

The continued losses of the Berlin and Austin plants have brought the importance of the Shanghai plant to the forefront.

In July 2018, Tesla signed an investment agreement with the Shanghai Municipal Government for an all-electric vehicle project. in November 2019, the Tesla Shanghai Superfactory entered pilot production. From an empty lot to completion and production, the Shanghai Superfactory took just 10 months.

In January 2020, the model 3 made in the Shanghai plant started to be delivered to social users.

In 2020, Tesla's global production was 509,000 units, an increase of 144,000 units over the previous year - and the Shanghai plant produced exactly 144,000 units for the year, meaning that all of Tesla's increased capacity that year came from the Shanghai plant.

It was also the year that Tesla achieved its first annual profit since the company was founded, with a net profit of US$862 million.

Annual deliveries from Tesla's Shanghai plant reached 484,100 units in 2021, an increase of 235% year-on-year and accounting for 51.7% of Tesla's annual deliveries, up 20 percentage points compared to 2020. Annual exports exceed 160,000 units, supplying more than 10 countries in Europe and Asia.

The Shanghai Superfactory now has more capacity than the Fremont plant and is the global export hub for Tesla.

The Shanghai plant has not only helped Tesla solve its production capacity problem, but has also helped Tesla save a large amount of production costs. The unit cost of producing the model 3 at the Shanghai Lingang plant is 65% lower than the production cost of the US plant alone.

The entry into China has also brought a huge market for Tesla. 2021 saw Tesla's annual domestic retail sales in China reach 295,000 units, an increase of 114% compared to 2020. in the fourth quarter of 2021 and the first quarter of this year, China's share of Tesla's global market reached 38% and 35%.