Elon Musk Interview: Tesla Was Near Death During Model 3 Ramp-Up

NOV 26 2018 BY MARK KANE 62

Tesla was just weeks away from running out of cash.

According to one of the latest interviews with Tesla CEO Elon Musk, the company was near death during the Tesla Model 3 ramp-up.

Musk said that Tesla was essentially bleeding money like crazy. There was an urgent need to solve serious problems on the production lines in a very short period of time and it was extremely difficult to resolve them.

“Mike Allen of Axios joins ‘Squawk Box’ to discuss Axios’ interview with Tesla CEO Elon Musk and the chances of the United States sanctioning Saudi Arabia.”

Asked about how close to death did you come, Elon Musk replied that Tesla was just a single-digit number of weeks away.

We’re getting the knowledge now, about a year since Tesla was in the heart of the production hell, while Elon Musk was rather positive or neutral in public statements at the time.

Since then, Tesla escaped from production hell and reported its first-ever profit.

Source: CNBC Television

Categories: Tesla

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62 Comments on "Elon Musk Interview: Tesla Was Near Death During Model 3 Ramp-Up"

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Speculawyer

Elon needs to learn to shut the fvck up.
1) This may attract lawsuits from trolls that will claim this should have been disclosed.
2) Tesla could have easily raised hundreds of millions more.

I know it makes for good drama and he certainly was stressed out. But don’t give the trolls nuggets like this that will be used to attack you!

Unrelated: Jalopnik is claiming GM killed the Volt. I find that very hard to believe.

Steven Loveday

It’s true. See homepage

Ptf

Why was my comment censored?

Steven Loveday

Which was it? Bot may have grabbed it up. I didn’t remove anything

Nix

Ptf — if you are new here, you might not know that when you type in a response, it initially appears at the top of the list of responses. But then when you refresh your page, it gets displayed in the time order that you entered it.

I see two posts from you responding to Spec further down the page. These would have been re-ordered and would appear lower on the page after you refreshed your screen. This is normal and expected on this site.

Timmy

Is it also normal NOT to be notified of responses to your comments? Because I never do, but I find it difficult to believe that so many would use it otherwise. Especially since it asks for your email address. Limited as Disqus may be, it does at least do that correctly.

I’ll now need to keep this tab open and refresh it just to find out if anyone replies to this. What a PITA!

Timmy

And to figure out why my first comment is “awaiting moderation”… FGS!

Nix

You will not get an email notification. I never have.

Ptf

I stand corrected. Thank you.

Art Vandelay

Agree 100%

John Doe

They could just have asked some investors. A few hundrede million dollars would not be that of a problem. They have some serious rich owners, investments funds and so on.

Doggydogworld

A few hundred million wouldn’t have helped much. They had to get Model 3 production ramped. That’s why they put a tent in the parking lot in June.

God/Bacardi

Popular theory was that they could never get the lines as fast as they thought they could so decided to build another line they didn’t have room for…

Scott Franco

“They could just have asked some investors.”

I think you mean “ask again”. And again. And again. And again…

Impartial Observer

I agree. Musk is being melodramatic here. Tesla had many lifelines to tap in the equity and debt markets.

Musk is just crafting Tesla’s narrative/story, and his own narrative/story of being at death’s door, and triumphantly overcoming financial ruin to finally become a profitable automaker (at least for one quarter). A good story will help prop up Tesla’s stock price and ability to raise capital markets. 😀

ffbj

It’s true that Musk is a bit a drama queen but then to ascribe manipulative motivations to his actions is a bit of a bridge too far.

Ptf

This is the same BS Elon said about Spacex. The great Elon rolled the dice and came out a winner. Ha! Cultivating his own narrative. EGO!!

REXtoCheckMate

Yes, he came out a winner by working hard and putting together a large team of Well Qualified People, not afraid to hire talent.

So, you wonder why he succeeds so often?
Build the right team.
It’s not a one man show.

Paul Smith

Bit of a stretch for you to be judging him.

Ptf

Same narrative as Spacex. The great Elon rolled the dice and came out a winner. Cultivating his own legend.

Paul Smith

Why do you have such a problem with people who outperform you on every level?

Robert Weekley

Well… He has… PTF!
(Post Tax Failure, I Guess!)

Ron M

I’m just happy that the 10 shares I bought when Tesla went down after Musk talked about 420 was able to save Tesla from bankruptcy.

Do Not Read Between The Lines

1) No it won’t. It’s a risk of doing business
2) I disagree. The cash shortage was due to the inability to make cars. A lender would be betting on the company fixing the problems that had got it into the mess in the first place. And a signal of failure would likely have sent customers running. Would have been a very expensive loan.

Unrelated: GM announced it. It makes sense for a lot of reasons.

HTSS

“But don’t give the trolls nuggets like this that will be used to attack you!”

The problem with Elon Musk is he doesn’t give anything that wasn’t in his mind. He just said the truth, even if it may harm his position.

Another Euro point of view

So the shorts were not that far from the truth after all.

Impartial Observer

And the rabid Tesla fanbois, who don’t know how to read financial statements, were dead wrong after all.

MDEV

Better to be a a Tesla fan that a bitter Trumpiest troll.

ModernMarvelFan

They aren’t mutually exclusive.

Dante

I think it’s objectively true that Tesla did not go bankrupt, Tesla’s Model 3 is in the top 5 of sedans, Tesla was profitable in Q3 as predicted, and is generally fine. What were they dead wrong about?

Pushmi-Pullyu

Nothing, absolutely nothing, that serial Tesla bashers like “Another Euro…” and you, “Impartial Observer”, have ever posted about Tesla has ever been true.

Not one bit of your FÜD or your Big Lies. None of it.

Including this.

Chris O

I think you should be banned form further commenting for using troll terms like “rabid Tesla fanbois”.

ffbj

Not really, since according to them, Tesla ran out of money 3 years ago, then 2 years ago.
It is true from their bean-counter world it was hard for them to fathom how Tesla could survive, and yet they did, even though they were in trouble. So the shorts were right in a sense, but they lost their senses when Telsa shot up.

Pushmi-Pullyu

A lot longer, and far more often, than just a couple of times 2-3 years ago. Short-selling serial Tesla bashers have been predicting “confidently” that Tesla would run out of money within 3 months, every quarter since Tesla first started selling cars in mid-2008.

Sadly, the histrionics here from Elon, in making the “story” of Tesla more melodramatic, feeds into the entirely false serial Tesla basher narrative. 🙁

Speculawyer

They were far from the truth. The reality is that it would have been trivial for Tesla to raise hundreds of millions.

Doggydogworld

And buy an extra month?

Every founder who misses targets badly has to deal with his primary investors. I agree Tesla could have raised more money, but the terms would have significantly diminished Musk’s control. That’s the same as death to him.

Dante

That’s the part I don’t get. Why are people still imagining an alternative scenario where Tesla was poorly managed in to an inevitable bankruptcy? The premise of Tesla only “buying an extra month” doesn’t make sense because every month is another month of profit. The premise of Musk losing control of his company by borrowing a few hundred million doesn’t make sense because Tesla has a $1b credit line against their inventory that they exercise at will and Musk remains in control. That plus the market cap never went below $40b in the last year.

They way I saw it, Tesla did the math and restructured themselves from “certain doom” to profit in a single quarter and said all along that they were going to do so. This is just Musk humble-bragging. If the shorts want to learn a lesson, it’s probably that Musk will always swoop in to save his companies and can do it whether or not he’s cracking under the stress.

Doggydogworld
“…every month is another month of profit.” Until they ramped Model 3 at the end of June, every month was another month of loss and high cash burn. Cash payments were coming due on construction work and equipment done at Fremont and GF in 2017 and early 2018. An even bigger problem was parts and materials. Tesla did a lot of “take or pay” contracts and similar structures to induce suppliers to pre-build infrastructure for 5000/week. They’d stretched the timeline to the breaking point and suppliers were losing faith. Suppliers calling in their chips will absolutely kill a company. Toys R Us is one recent example. “Tesla has a $1b credit line against their inventory” It’s $1.825b, but was essentially maxed out in Q2. Also, they can’t borrow against it “at will”. The borrowing base is mostly a function of new cars in transit and inventory cars. The ABL solves the problem of financing new cars until Tesla gets cash from the customer. It does not help one bit with Tesla’s problem in Q2, the inability to build enough new cars. I agree Musk is being a bit of a drama queen, but without an immediate Model 3 ramp he… Read more »
Pushmi-Pullyu

Absurd. As Nix pointed out a year or two ago, if the Model 3 had been a failure, Tesla would just have gone ahead with the Model Y.

Tesla Motors did not, and does not, start and end with Elon Musk. In fact, Tesla Motors was founded before he joined — despite his claim to be a “founder” — and Tesla will survive if and when he leaves.

Dante

Shorts generally miss that Musk hasn’t actually bankrupted any of his numerous companies and is extremely resourceful. I don’t know how though, he has a three-decade record.

Impartial Observer

Yeah, if you don’t count Solar City, which was on the brink of bankruptcy when Musk convinced Tesla’s board to acquire Solar City so that he wouldn’t have a failed company on his epitaph, and to continue his narrative/story that he had the Midas touch.

Dante

Yes, he saved all his companies from what people were calling certain bankruptcy multiple times for three decades running. We agree. He’s smarter than anyone shorting him.

windbourne

He did not run solar City. His cousins did.

Impartial Observer

Musk came up with the idea and business plan for SolarCity. Free the company was incorporated, Musk was the Chairman of the Board of Solar City and its largest shareholder. Musk owned 22% of SolarCity stock, which gave him a controlling interest. This controlling interest allowed Musk not only to vote himself Chairman of the Board, but also to choose and vote in a majority of the Board members who he controlled, making them non-independent board members. Musk’s control of the board gave him the ultimate say in who would be and stay SolarCity’s CEO. Musk deemed that his cousin would CEO right up to when Musk engineered Tesla’s buyout of SolarCity to save it from certain bankruptcy.

In other words, Musk ran the show at SolarCity.

Impartial Observer

An example of a non-independent Tesla board member controlled by Elon Musk is his brother Kimbel. In this interview Kimberly doesn’t appear qualified to sit on the Board of a multi-billion dollar company and be charged with overseeing Tesla’s CEO, Elon Musk.

https://www.mediaite.com/online/varney-shuts-down-surreal-interview-with-elon-musks-brother-you-think-my-viewers-want-to-learn-about-plant-a-seed-day/

Do Not Read Between The Lines

They were wrong about demand, competition and Tesla’s ability to overcome their production problems.
I’d say that puts them a long way from the truth.

HTSS

“So the shorts were not that far from the truth after all.” Shots were and are absolutely wrong about the most importance fact: Tesla has Elon Musk and he isn’t give up on things he wants to achieve over his life time. He had to work up to 20 hours a day 7 days a week for many weeks to save Tesla, who else can do this ?

Jopp

Elon Musk Interview: “Again i lied to you all, put your money at risk and came away with it”

He really needs to stop talking. He is a smart guy, but his even bigger ego is a real problem for his company.

bradley cross

Elon & Tesla must have a news story every 2 days. Since they have no “advertising”?

ffbj

There is a great deal of truth here. But it is trivial for Musk to keep Tesla in the news. In fact he does need to do much at all to keep it there, the news media does it for him.

Pushmi-Pullyu

Yeah, Elon unfortunately is willing to play the drama queen — as he is doing here with his histrionics — to get attention. Yeah, Tesla needs a lot of free advertising. But this sort of wildly exaggerated “revisionist history”, it doesn’t need.

ffbj

Every loves an Horatio Alger story, especially one that keeps repeating. It’s like a soap opera, not at all like real life.

ModernMarvelFan

Tesla almost died 3 times already.

Once around 2008/2009 and DOE loans saved Tesla.
Second time around 2013 just after launch of Model S and it had weeks left before running out of cash. But it made thru.
So, the 3rd time is early this year.

it sounds like every time there is a major model launch, the Tesla is close to death.

I hope it won’t repeat for Semi or Model Y.

Pushmi-Pullyu

Except that Tesla was a very long way from “almost dying” this latest time, as anybody can plainly see from Tesla’s financial statements… sharply contrary to Elon’s revisionist story-telling here.

And that makes me seriously question those other two times he keeps talking about. Maybe those are also personal myth-making by Elon, rather than Truth.

HTSS

@ModernMarvelFan – “Once around 2008/2009 and DOE loans saved Tesla.”

Tesla was saved by $50 million investment and the drive train contract from Mercedes in 2008. This was confirmed by Elon Musk in an interview. The $465 million DOE loan was after this Mercedes deal. He said this simple sentence: ““We were saved by Daimler,””

Source: https://www.greencarreports.com/news/1074375_elon-musk-daimler-saved-tesla-doe-loans-a-bad-idea

Pushmi-Pullyu

Ridiculous. Elon is obviously being a drama queen here. Tesla may have been “in danger” of having to borrow or raise more money on less favorable terms than they have been in the past, but that is a very, very long way from being “near death”. Tesla’s assets continue to accumulate faster than its debt, which shows just how healthy the company is. At worst, Tesla could have sold off some assets of marginal value (such as its SolarCity division).

I’ve long wondered about Elon’s claim that Tesla was only days away from bankruptcy when Daimler stepped in with a $50 million investment. I’ve often wondered if that was an exaggeration; just Elon making a melodramatic claim to get attention and make the “story” of Tesla more interesting.

Of course, this latest over-the-top drama queen claim isn’t proof that he earlier claim was exaggerated, but it certainly lends credit to that hypothesis.
(◣_◢)

Nix

Putting a new product into production is always a risky move. That is the definition of Capitalism. If Capitalism were easy and there were no risk of failure, then every company would succeed.

Seems like Musk is re-living the worst stresses of the processes the same exaggerated way that most humans recount highly stressful parts of their lives — with a healthy dose of the dramatic. That is just human nature.

The only thing I am certain about, is that whatever dramatic twist Musk put on the events, that there will be 10 times as much drama put into the RESPONSE to his comments!! I expect lots of over the top contrived hyper-negative dramatic responses by people overly dramatically complaining about Musk being overly dramatic….

M Hovis

I agree. Call me nuts, but I think everyone watching the balance sheet understood that they were cutting it close. By early 2018, one could see that the Model 3 needed to be at 55,000 -60,000 per quarter with a 15%- 20% profit margin. That’s a little generalized but it got you close to understanding that it had to happen this year. I told my friends that they need to get close to break even in Q3 and had to turn a profit in Q4. Musk has always run an aggressive business model. I only find fault with his tweets. Imagine a world where Elon and the Donald did not have a twitter account. The world would surely be a better place.

Edward

It must have been really stressful. He will probably go bald within 5 years

Timmy

He already went nearly bald in his 20’s. Look at some old pictures.

Impartial Observer

Here are some before and after comparison pics.

comment image

Will

Yeah money can buy hair