Grünheide and Austin: Musk: Tesla factories burn billions

Status: 06/23/2022 09:28 a.m

According to CEO Elon Musk, the new Tesla car factories have turned out to be “gigantic money incinerators”. The plants in Grünheide and Texas are currently losing “billions of dollars”.

The bad news from the US electric car manufacturer Tesla is piling up. CEO Elon Musk only announced on Tuesday that in the coming months to cut up to 3.5 percent of the jobs. He reiterated that he expects a recession in the US in the near future. But these are apparently not the only stress factors for the Nasdaq heavyweight, as can now be seen from an interview published yesterday.

“The Sound of Money on Fire”

According to the talks held last month, the new Tesla factories in Grünheide near Berlin and in Austin, Texas are currently losing billions. “The two factories in Berlin and Austin are gigantic money ovens at the moment,” Musk told the Tesla Owners of Silicon Valley fan club. “It’s really like a gigantic roar, that sound of burning money.”

The reason is a lack of batteries and supply chain problems because of the situation in the Chinese ports, Musk explained. The factory in Texas is apparently much more affected than the plant in Grünheide. In Texas, only a vanishingly small number of cars would roll off the assembly line at the moment.

Grünheide in “slightly better position”

There are difficulties in ramping up production of the new 4680 batteries and the tooling to make the traditional 2170 batteries is “stuck in a port in China,” Musk said. The factory in Grünheide is in a “slightly better position” because the traditional 2170 batteries were installed from the start.

The tech billionaire described the past two years as an “absolute nightmare” in view of the auto industry’s persistent supply chain problems. The Tesla boss also warned: “We’re not over it yet”. For Tesla it is about keeping the company running so that the employees can continue to be paid and the group does not go bankrupt.

According to Musk, Grünheide is doing a little better than Austin.

Image: picture alliance/dpa/dpa-Zentral

High cash burn rate is a red flag

Elon Musk’s drastic words bring back memories. Even in the years of the Neuer Markt there were many companies that burned a lot of money within a very short time. Back then, investors didn’t measure a company’s success by its profit but by its cash burn rate.

The more capital a start-up swallowed up in a short period of time, the better. During the dot-com boom, a high cash burn rate was considered a virtue, not a flaw. But times have changed. Today, a high cash burn rate is a serious red flag for analysts and investors alike.

Tesla stock hit the road

The calm reaction of the stock market to the statements of the Tesla boss is all the more astonishing: In after-hours trading in the US, the Tesla share lost just 0.8 percent. However, the paper had already lost some feathers in the past few months.

Since the all-time high at the end of December 2021 at $ 1243, Tesla shares have fallen by 50 percent at their peak. It currently ranks at $700.

Tesla also has problems in Shanghai

High start-up costs and losses in the start-up phase of new factories such as in Grünheide and Austin are relatively normal and are not a cause for concern per se. But even with its established plant in Shanghai, Tesla is apparently facing challenges. “The Covid shutdowns in China have been very, very difficult to say the least,” Musk said.

The electric car maker plans to suspend most of the production at the Shanghai site in the first two weeks of July due to modernization work to increase production, according to an internal memo.

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