Elon Musk Emails Tesla Employees – Pushes For Q3 Profitability To Silence Naysayers

Elon Musk

SEP 5 2016 BY ERIC LOVEDAY 84

Tesla Model 3

Tesla Model 3

Tesla CEO Elon Musk reportedly sent out a mass email to Tesla employees “urging them to cut costs and deliver “every car we possibly can” in a push to show positive cash flow in the third quarter,” according to Bloomberg.

Bloomberg says that it obtained a copy of the email this past Friday and was able to verify its authenticity through a Tesla spokesperson.

The email states:

“The simple reality of it is that we will be in a far better position to convince potential investors to bet on us if the headline is not ‘Tesla Loses Money Again,’ but rather ‘Tesla Defies All Expectations and Achieves Profitability. That would be amazing!”

For Tesla, Q3 will be the automaker’s last chance to show profitability prior to the ramp up (with lots of associated spending) of the Model 3. Per the email:

“I thought it was important to write you a note directly to let you know how critical this quarter is, The third quarter will be our last chance to show investors that Tesla can be at least slightly positive cash flow and profitable before the Model 3 reaches full production.”

According to the email, Tesla is “on the razor’s edge of achieving a good Q3, but it requires building and delivering every car we possibly can, while simultaneously trimming any cost that isn’t critical, at least for the next 4.5 weeks.”

Tesla hopes to deliver 80,000 cars this year, but the automaker missed its sales targets for the first two quarters of 2016, so Q3 and Q4 will be important if Tesla hopes to still achieve its 80k unit goal.

Lastly, as Musk points out in the email, a profitable Q3 would allow Tesla to temporarily silence some naysayers:

“It would be awesome to throw a pie in the face of all naysayers on Wall Street who keep insisting that Tesla will always be a money loser!” 

Source: Automotive News

Categories: Tesla

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84 Comments on "Elon Musk Emails Tesla Employees – Pushes For Q3 Profitability To Silence Naysayers"

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Even though companies often push employees to cut cost, one has to remember the following:
1). He stresses the next 4.5 weeks, this means this is temporary and SOELY to mislead investors to sell more stock
2). He was so blatant to say this is only for September and solely for selling more stock
3). He sounds desperate.
4). It is almost certain next quarter would incur huge losses, also he would sell/deliver more Mode S/X in September with huge discount, all designed to show positive cash flow.
5). Eventually he would be sued by investors for fraud.

LOL.

If at huge discounts Sand X are still profitable, Your whole gibberish is contradicting itself.

After Q3 passed Tesla plans huge CapEx for launching Model 3.

Like any other big car OEM would if they planed to launch new car on new assembly lines.

Hence Q3, and rally message to all employees.

Ultimately You are true though it’s all too get investors to buy some future Tesla stock.

Like … Eeee…. Any publicly traded company’s CEO move should be about.
Do You even know for whom publicly traded companies work?

Heck, his babbling post shows he doesn’t even know how to spell “anti-” or “solely”.

And he’s clearly one of those short-sellers who actually think they can convince people that Tesla makes tip-top rated, premium cars merely as a front for an elaborate stock manipulation scheme. (Rather hypocritical, since the purpose of those short-sellers insinuating that is to manipulate the stock price!)

This Babbling Clearly indicates that he doesn’t know the difference between “LIVE STOCK” & “COMPANY STOCK”…He says, “Sell more stock” I don’t see Tesla doing a PO ..W0W!.This Guy Hasn’t got a clue as to what is transpiring…

It’s clear that Tesla didn’t cut costs with regards to their paid shills like Pushmi-Pullyu. I guess he’s not paid per post, but instead works on salary. 😀

Gosh yes, I must be paid shill for Tesla. Elon likes to pay people who criticize him. /snark

If he did, then I could afford both a loaded Model S and a loaded Model X, and have enough money left over to buy a Bolt! 😀

But to get paid, one must first have valid snark. 😉

“There’s my argument. Restrict immigration.” — Groucho Marx

Sell More stock??(*&^%$#@.. Are You for real?..Tesla Is not doing PO . Where do you get this “SELL More stock ? They did a stock swap solar city..THEY’RE NOT DOING PO TO SELL ANY STOCK ! They did a public offering some time ago to raise money for the model 3. As far as I know that was it. I don’t think Elon wants to dilute Tesla stock anymore than he needs to.

They’re going to need more money for the Solar City merger and continuing operations. It was in their recently filed SEC documents, and Musk alluded to it as well.

Expect a capital raise of some sort by the end of the year.

Yes, we can expect another stock issuance from Tesla sometime in the next few months. I’m guessing one somewhat larger than the last (which was rather small), given the amount of capital they need to raise to ramp up production of the Model ≡, including completion of Gigafactory 1.

it certainly seems like this letter is the result of meetings that musk had with the board of directors. as to your 5 assertions, they generally don’t seem to have much merit other than, possibly, the last assertion. the main basis for an investor lawsuit would probably be in connection with the solar city merger. that merger raised some eyebrows in that people noted that solar city was run by a cousin of musk. i think musk when out on a limb in selling the merger to the board of directors, so people are probably going to be quick to blame any potentially unfavorable financial results on the merger.

personally, i think that solar city is a headache that musk really didn’t need right about now.

“Ani Fraud”

Even Tesla detractors have Fraud as their last name!

Nice going, Ani!

Is SOELY a word?

Hey, A-F! Musk did the same thing before Model S began production. They had positive cash flow before the Model S production began, specifically due to the cash needed to ramp production up from a few dozen units to hundreds of units a week.

Also, you didn’t pay attention to the whole article (as short as it is). They said that there would be a huge cash burn, which EVERYBODY ALREADY KNOWS, to put the Model 3 into production. Tesla Motors does not really have a chance of turning a profit, for the company as a whole, until the early 2020s when the Model 3 production has reached the volume goal.

Isn’t it interesting to realize that you were actually spot on? This was a one time off for Tesla and Musk was charged with security fraud

“urging them to cut costs and deliver every car we possibly can”

i.e. forget about quality, let’s just push out any junk we can.

He’s got some nerve this guy! He already pushes his staff very hard, he then gives unreasonable promises to investors and then expects his staff to make them happen by pushing them even harder!

This is likely going to bit both Tesla and Musk himself in their backsides eventually.

He didn’t mention anything about firing his assembly line quality inspectors or accelerating the assembly line. There are lots of ways to reduce spending without impacting quality. They could hold off on building service centers and superchargers. If they can really start making and selling 200 P100DL’s per week, that should help a lot.

Can you believe the CEO of a company has the nerve to ask their employees to work hard or has the nerve to set stretch goals or has the nerve to ask employees to reign in unnecessary costs/spending. Unbelievable!

If it’s not obvious, this is called sarcasm.

Elon has run his employees very hard for years already and now he wants to push them even harder. I don’t think it will end well.

LOL, for sure it won’t end well for your short position when Tesla is selling and delivering hundreds of thousands of compelling EVs which will be happening within 2 years which is a very short time in the auto industry.

I don’t have a short position so I’m not worried. Quite the opposite, I hope you’re right.

No worries, they will be fine as they already have close to 30 billion in pre-orders that will start shipping in about a year.

Yeah, what could possibly go wrong?

/s

he could quite easily just outsource the fabrication,let say to Mexico,(as many others,like VW do),or even to Turkey,or Hungary(Audi,Mercedes,Suzuki)……could save piles of money………..

Or they could do like BMW and have Magna International make entire cars for them. Even better, they could do like GM and make cars in China for the US market.

YEA.., & The Fools are still buying them!

Only two GM models are made in the People’s Republic of China. The Buick Envision compact crossover, and only the Hybrid version of the Cadillac CT-6. Volvo (Chinese owned) has the S60 Inscription. That’s it! Less than 1% of GM’s car production in China ends up on dealer lots in North America.

For now…

REMEMBER….You can “CUT COSTS” without “CUTTING CORNERS” If it’s done Properly.* Eliminating waste..Precisely What Elon is Hinting at.

Is that what the Grey aliens told you to say? Or was that from the blue aliens?

my guess is that tesla expects that there is going to be a certain degree of “bad news” as a result of the solar city merger. specifically, my thinking is that the merger could have weakened the tesla balance sheet, which in turn, would make it more expensive for tesla to raise funds in the future. combining this with the scuttlebutt that tesla is in a weakened cash flow position, tesla would need to have something that could be passed off as being “good news”.

Yes, the acquisition of SolarCity certainly isn’t going to help Tesla’s cash flow, and it’s doubly questionable that the buy-out was done at such a critical period for Tesla, exactly when they need money the most. If there is any silver lining to that cloud, it’s that the buyout was done with an exchange of stock only, and not using any cash. But it’s still going to be a drag on Tesla’s income, at least in the short term. Whether or not the acquisition will ultimately prove profitable for Tesla is something we won’t know for some time, but I’m not optimistic. The market in general disapproved of the merger, and I’m guessing the consensus is right. Still, I’m hoping to be proven wrong there!

Silver lining? For Tesla stockholders, it’s a dilution of their shares since Tesla had to issue new stock to Solar City shareholders.

the only way that i can make sense of the solar city bailout is that musk pitched it as a deal which would help tesla sell more powerwall systems, which in turn would mean more production at the gigafactory, which in turn would mean lower costs (and therefore) higher profitability for tesla motors. if true, the problem that i can see with such a strategy is that it is a high risk strategy even by tesla standards.

the funny thing is that when i called the tesla/solar city “merger” (actually tesla bailed out solar city) a bad idea a few weeks ago, the fanboys raved and accused any critics of being tesla haters. the moral of the story: never rely on an elon musk fanboy for any advice that could impact your wallet.

as to the “silver lining”, in the long term, equity is the most expensive form of financing; debt is much cheaper. the reason why companies don’t load up with “cheaper” debt is because it can wreck your financial statements, which could both sink your stock price and increase the cost of future capital. it’s a balancing game…

F@%$ WALL STREET they are owned by the fossil fuel cartel and would love to see Tesla collapse in order to continue selling toxic pollution to consumers. GO TESLA GO

+1

How dumb you need to be to not realize that Tesla is Wall Street child! 6 secondary share sales in row, 7th pending, all pumped and sold by Morgan Stanley and Goldman Sachs for hefty commission. Tesla would have been toast years ago without Wall Street pumping. Or maybe if fanboys would have been more earth bound, the management would have been stopped from reckless cash burning and it would have been evolved into normal self sustainable company, not dependent on Wall Street pumping and dumping. Its financials looked much better in 2013. Wall Street will cut life support as soon as it will get too hot for them to stay comfortable, just like it happened with Lehman Brothers. And what would Musk do without Wall Street money then, when all cash will be spent for SolarCity anchor, nothing left for Model 3 scaling?

Hmmm, I had this strange idea that Tesla makes the highest-rated car ever made, that it’s trying to make and sell as many of them as it can, and that it has the highest customer satisfaction rating of any auto maker.

Silly me, not to realize that Tesla is just a stock pumping scheme. Thanks for opening my eyes! 🙄

I’m glad you mentioned Lehman Brothers because it shows your ignorance or maybe anti-tesla bias. Lehman brothers collapsed due to subprime mortgage affairs and flat out fraud (repo 105), Lehman did get too hot for wall Street banksters because tax payers would not provide corporate welfare to bail Lehman out. Wall Street is the biggest scam on earth. GO TESLA GO

Saving money by reducing spending now, is all about keeping Tesla’s low cost loans coming from Wall Street. When Interest rates get a nudge up later this year, the “fast and loose” mood from Tesla’s institutional lenders will definitely change. This is a clear heads up to many Tesla Employees, that Elon is about ready to go “all in” with his company leveraged on the Wall Street dime. This should get interesting, as the institutional cash lenders deck gets reshuffled. Model 3 can’t come soon enough.
An on time M3 launch, should keep Tesla growing, without having to take a big hit in their $29Billion and falling Market Cap. Holding out hope that 2018 is Elon’s 1/4 Million car sales and delivery year.

I hope they make it…
However, the original target for 2016 was ~100K cars, and it was eventually downgraded to 80K…
If won’t be able to reach that by year-end, the super-aggressive target for the Model 3 will look ridiculous (let alone bringing it forward by 2 years…) They could lose a lot of business.

The merger with Solar City was/is IMHO a stupid move, on the basis of management attention alone. These are very different companies with different business models (synergies could be handled by simple customer-supplier cooperation).

If I were a Tesla shareholder, I’d demand Musk leave any active role in SpaceX as well.
And before someone gives the example of Steve Jobs & Pixar, Pixar was always mostly a hobby for him, and he pretty much never involved himself in day-to-day management, in big contrast to Apple.

Personally, I’d like to see Elon take a less active role at Tesla, and concentrate on SpaceX. Between the way he pushes all the Tesla employees to be workaholics just as fanatic as he is, and his ramming through the rather questionable SolarCity acquisition, apparently to benefit his personal finances… well, I think it’s time for Elon to step back and let someone else take the reins. He could stay on as a board member, but someone else needs to be CEO.

Just my opinion, of course.

He has said the very same thing himself. He has said that he wants to take a less active role once the Model 3 has released and is up to production targets.

We’ll see if he can actually do this or not when the time comes.

@wavelet
“the original target for 2016 was ~100K cars, and it was eventually downgraded to 80K”

Which is still 30k cars above last year’s 50k. Not a bad number considering the inevitable production issues with a new and very complex car (the X).

Hey Bloomberg, since when is a boss sending out a memo to employees to decrease costs and increase production …….”news”….?

If it is, can I get scoop pay for emails I can obtain from literally every company that exists in this world?

What the author conveniently omits in attempt to push “Musk the Great” thesis, is this quote:
“simultaneously trimming any cost that isn’t critical, at least for the next 4.5 weeks.”
What it means all payments will be delayed until next quarter :/ Of course you can achieve artificial profitability this way for one quarter, except that next quarter will have the same amount in losses as suppliers will wait forever for their money.

I’ll leave it to SEC lawyers to find out if it qualifies as fraud or not, but I personally can’t trust such management.

On the other hand, we don’t need to wait to see if FUD posts from you and other serial Tesla bashers qualify as attempts to commit fraud. That’s a self-evident fact.

Legal definition of fraud:

A false representation of a matter of fact—whether by words or by conduct, by false or misleading allegations, or by concealment of what should have been disclosed—that deceives and is intended to deceive another so that the individual will act upon it to her or his legal injury.

source:
http://legal-dictionary.thefreedictionary.com/fraud

I already get the impression that Tesla employees are greatly over worked and now is sounds like they are getting even more pressure to achieve short term profitability. Tesla has a HUGE overhead with it’s proprietary supercharger network and company owned dealerships. The market capitalization is highly inflated and could not even be supported by the sale of 500,000+ cars a year.

Tesla is a stack of cards and a strong wind could blow it all down. If Tesla does survive it’s going to have to go through a very ugly adjustment period to normalize stock price and profitability. I’m just glad I’m not a Tesla employee, vehicle owner or stock holder.

“The market capitalization is highly inflated and could not even be supported by the sale of 500,000+ cars a year.”

10,000,000 is also 500,000+ cars a year 😉 You forgot to put an upper limit in there.

I remember the shorts in 2012 proclaiming with confidence that Tesla sales would grind to a halt after delivering to the people on the waiting list for the Model S.

Tesla won’t stop at 500k cars per year. I can see their current market cap ($ 26B) justified by 1 million cars per year, which would give them annual revenues of $ 50B, excluding Tesla Energy products (powerwall & powerpack).

So that correction will very likely never come.

As has been said numerous times by others, the timely delivery of the Model 3 is make or break for Tesla. If they pull it off and proceed with the Model Y, that million cars per year are a certainty.

Tesla would have to sell ten million cars a year to justify a $26B capitalization. That’s a tall order for a car company that has never sold more than fifty thousand cars a year. You better keep your parachute handy.

Not necessarily. If utilities installing battery backups for grid storage takes off in a big way, Tesla Energy could be more profitable than Tesla Motors.

And when I say “profitable”, I mean selling products that are profitable to make and sell, regardless of how much money the company is also spending on growth. That should be accounted for separately, to avoid the nonsense of otherwise apparently sensible people claiming Tesla “loses money” on every car it sells. 🙄

Nonsense. Toyota sells 10 million cars a year and has a market cap of 200 billion.

Ford and GM sell around the same number and are worth 50 billion.

And you forget that the average selling price of a Tesla is much higher than the average Ford, Chevy or Toyota.

Essentially, what you’re saying is simply not true.

According to Tesla’s SEC filings the net book value of the supercharger network is $180 million for 661 supercharger stations globally. It’s not a huge cost and it’s a great marketing tool for Tesla. If Tesla sells the expected 80k cars this year that will bring in $160 million for the Supercharger network, almost covering the cost in one year even though it is 4 years already. Of course it costs a little bit to run as well but the big cost is building it.

Yeah, it’s rather uninformed to claim the Supercharger is a significant money-loser for Tesla. There’s no doubt that Tesla gains more in additional profits from car sales than the company loses from the cost of running the Supercharger network.

Indeed, without superchargers there would be no Tesla today. It’s as simple as that.

Let me guess. Tesla would be profitable if they only dumped the EV drivetrain for an ICE, dumped the Superchargers for 3rd party owned gas stations and dumped their own sales model and adopted the FAR superior independent dealer sales model.

You can here the same from every 8th grader. “I would easily be able to get good grades if I wanted, but I don’t” :/ In reality, this article compares completely phony gross margin numbers. All automakers sell at wholesale price to dealers. Except Tesla, that sells at retail prices, so its gross margin doesn’t includes expense of its own sales/repair network, which goes into SG&A, about 22% per car, or whatever it is now. Once you subtract these 22% (or most of it) from gross margin, subtract R&D, you get into negative hole. And it is not likely to change much with Model 3, as sales/maintenance centers will need expansion and costs per car will stay about the same. Gross margin is not comparable between Tesla and Ford or GM, they are calculated in completely different way and mean different things. Tesla eventually may go with autodealer model if it will run out of capital, Musk had some hints on this. But then it would need to sell below retail price to dealers. Contrary to popular fanboy urban legends, autodealers stopped making profits on service center long time ago, as cars got much more reliable and don’t need much… Read more »

Losses are high due to massive investment in future growth. And no, sales centers will not increase costs with the arrival of model 3 because they will have a much higher turnover. With the arrival of faster ccs chargers Tesla might also relax about rolling out its own charging infrastructure, join ccs and concentrate on making cars. Imagine what profits you would see on the balance sheet of the traditional car manufacturers if they all had to build their own petrol stations.

zzzzzzz is correct, the Motley Fool article is silly. It’s true rapid growth inflates TSLA’s R&D, but it’s much harder to make that argument for SG&A. The main reason TSLA’s SG&A is so high is that it includes all dealer costs. There’s really no way for TSLA to get SG&A to the levels Motley Fool claims.

That’s not to say they can’t reduce per car SG&A as they grow. Frankly, they have to. At current levels SG&A makes them unprofitable even before R&D is subtracted.

Interesting point about service center costs and gross margin.

If true, Tesla is not looking good.

I can certainly see why that article has you running scared, zzzzzzzzzzz. It highlights exactly why all the counter-factual FUD, spin, and conspiracy theories that the more reasonable Tesla short-sellers have been claiming for years is flat wrong; the fallacy of claiming that Tesla is “losing money on every car it sells”. What amazes me is that anyone could actually believe such nonsense. I mean, seriously, how could any reasonable person believe Tesla would be more profitable if it made fewer cars?!?!

Not that either you or sven are to be counted among the more reasonable Tesla short-sellers. Actual facts and truth are clearly irrelevant to your agenda.

That link is certainly worth repeating.

“How Tesla Motors Could Be Profitable if It Wanted To”:

http://www.fool.com/investing/general/2016/03/27/how-tesla-motors-could-be-profitable-if-it-wanted.aspx

Where does the article author (Evan Niu) work now?

Please let me know. LinkedIn may help you.

Hint: Sounds similar to the company he discusses in that fool.com article.

The article aside, Tesla is opening a new store or service center every 4 days, on average, somewhere in the world, through the end of this calendar year 2016. That will not need to continue indefinitely. The sales/service portion of Tesla’s budget will be down to running costs long before 2020, which are much smaller than the cost to build the places to begin with.

The same is true of the supercharger network – they are building it out fast…that will not be necessary in perpetuity. Those costs will be down to operating costs, which, again, are very small compared to the cost to build them.

There is plenty of room for profitability once Model 3 sales are up to par.

If Tesla Motors wanted to be profitable now, then they would not have gone down-market to the Model 3. They would not have needed the GF, the creation of a true volume production factory line, nor as many sales and service centers or SC locations that they are currently building at a frantic pace.

They could have just stuck with the S and X and create the new Roadster.

Another Euro point of view
Having done a bit of homework to gather information it seems to appear that 1/ the markets reacted negatively to the fact that the bond market is not willing to lend any cash to SCTY (according to Tesla own SEC filings). 2/ Tesla had to repay anticipatively approx. $400M on a credit line it has (I did not take enough time to understand why) 3/ That the above 2 is negatively affecting cash situation of Tesla and possibly leaving Wallstreet under the impression that SCTY take over was all about bailing out this company at least partially to keep Elon’s image as successful entrepreneur intact ( I understand Elon is a board member of SCTY, a bankruptcy of this company could have been detrimental to his image). 4/ As a result of the above stock price is a bit depressed (came from 230’s to 200’s) which is not good for coming new stock issue which Tesla announced. 5/ As a reaction Elon decided to send this email to his employee. I am surprised however that he wasn’t a bit more cautious in the wording of this email knowing that one way or another it would have quickly leaked to the… Read more »

“car electrification does need a strong Tesla”

I agree with that statement. As much as the Tesla groupies irritate the heck out of me, I think it would be a tragedy if Tesla went belly up.

Another Euro point of view

Probably an overwhelming silent majority do share your opinion.
If we could quantify in terms of autopilot casualties/falcon 9 rockets blowing up the negative impact that some fanatic fanboys have on general public perception of Tesla it would be what ? 10 autopilot casualties and 5 exploded Space X rockets ? A real blood bath because of a few highly immature & uninformed & vocal morons. If it happens that Tesla goes belly up one day it will be to a certain extend due to those people having drawn day after day a target on the back of a unsuspecting Tesla.

“Another Euro point of view” said:

“I am surprised however that he wasn’t a bit more cautious in the wording of this email…”

Elon is notorious for his unfiltered remarks in Tweets and emails, including those to his own employees. If you think that was bad, the threatening e-mail he sent to his Chinese market sales people last year was downright shocking.

This is not the first time Tesla has engineered a profitable quarter before raising more money. On one hand, it’s an existence proof the company can stop spending. On the other hand, it’s proof that the company needs to run through money like water in order to grow.

That’s the long and short of it! (puns intended)

😀

Elon is motivating his employees towards a great positive outcome and he acknowledge that further financing will be easier if results are attractive to investors. That sounds all normal and very positive to me. Exactly like what you would expect from a pro active leader.

Sounds like a good way to invite more quality problems. There’s plenty of research that shows performance goals often backfire and should be set with great caution. But I sure hope they succeed.

I don’t know of any Fortune 500 company that doesn’t regularly encourage their employees to hit company targets.

Getting employees personally invested in the overall goals and success of the company is normal and customary. This is why stuff like employee stock options exist.

I don’t see any problem with a company executive motivating employees, and letting them know exactly why.

This is one of those Rorschach test stories. If you see Musk as just another colorful CEO, in a long list of colorful executive officers in the (for example Bob Lutz), then you see this as nothing surprising. If you hate Musk or Tesla, then you think this is somehow bad.

Agreed. No surprises here…moving on…

If you believe in Tesla and the future then put up $1000 and order a model 3. 1,000,000 orders will secure the EV future. At least you will have done your part.

electric-car-insider.com

+1k

Toyota and GM both sell about 19 million a year. Toyota has a capitalization of $189B and GM has a capitalization of $50B. Ford sells about 11 million a year an has a capitalization of $50B.

If you’re going to rebuttal at least get your facts straight. Even if Tesla stock was as high as Toyota stock price, Tesla would still have to sell 3 million cars a year. That’s still a long ways from 50,000 or even 80,000 cars a year but I’m sure you will still find a way to justify (to your self) Tesla high stock prices.

Obviously the stock price of Kodak was very high just before digital cameras, but today Kodak is gone its stock is junk and digital camera makers are all over the place with very high stock prices. The electric cars and companies will just make a copy paste of the same story to ice cars and their remaining manufacturers. Stock price just indicate that many people are aware of that and are moving their money to the future winners instead of leaving it on future losers.

How many times have we seen these kinds of bubbles burst? The survivors are always the companies that exist on profits, not speculation.

Risk is always present and many digital camera manufacturers didn’t make it, but Kodak, Agfa, Fuji Film, all disappeared, muted or shrank into niche markets, none of them prevailed selling 24×36 films.