Elon Musk urges Tesla staff to chop automobile supply prices

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Tesla’s Model Y compact crossover vehicles in a showroom in Shanghai, China on January 18, 2021.

VCG | Visual China Group | Getty Images

Amid ongoing port restrictions and rising shipping costs, Tesla CEO Elon Musk on Friday in a company-wide email received from CNBC urged employees to look for ways to cut the cost of delivering electric vehicles to customers rather than placing last-minute orders rush to meet his quarter-end sales targets.

That year, Tesla struggled to get new cars to customers in the United States within the originally promised deadlines. As CNBC already reported, some Tesla customers experienced months of delivery delays, so they had to pay for rents and ride-hailing apps out of their own pockets and had to apply for loans again due to deadlines being exceeded.

Tesla isn’t the only one making customers wait longer than they’d hoped for their new, all-electric cars. Last week, for example, the newly listed competitor Rivian Automotive informed those authorized to reserve their R1S, a sports utility vehicle, of delivery delays.

Still, Tesla’s sales soared this year, seemingly unaffected by unpredictable delivery dates.

Vehicle deliveries, the closest to the sales of Elon Musk’s electric vehicle and renewable energy businesses, totaled around 500,000 in 2020. In the first three quarters of 2021, Tesla had already reported 627,350 deliveries.

Since the beginning of 2021, the company has not given a clear target for vehicle deliveries in 2021. However, Tesla has reiterated its loose forecast for an “average annual growth in vehicle deliveries of 50%” over a period of several years, including on its conference call for the third quarter.

Junheng Li, CEO and Head of Research at JL Warren Capital, wrote in a notice to investors last week that she expects Tesla sales to continue to rise, at least in China, this quarter. “The rising price of gasoline is benefiting all new brands of energy vehicles,” she noted in the country.

According to a study by Canalys, around 1.3 million electric vehicles were sold in China in 2020. The company forecast the number will grow to 1.9 million electric vehicles sold in China by the end of this year.

China remains the world’s largest market for new cars, with strong government support for electric mobility.

Here is the full email Elon Musk sent to all Tesla employees on Friday (transcribed by CNBC).

By: Elon Musk

For each

Subject Q4 deliveries vs. cost efficiency

Date: November 26, 2021 [time stamp redacted]

According to my email a few weeks ago, our focus this quarter should be on minimizing costs of deliveries instead of spending a lot on express fees, overtime, and temp agencies just to get the cars to arrive in the fourth quarter.

What has happened in the past is that at the end of the quarter we sprint like crazy to maximize deliveries, but then deliveries drop massively in the first few weeks of the next quarter. Over a six-month period we won’t have shipped any additional cars, but we’ve spent a lot of money and burned out for the last two weeks of each quarter trying to expedite deliveries.

We’re going to have a pretty big wave of shipments in the last weeks of December as we don’t have mass production in Europe or in Texas, which means a lot of cars are on boats from China to Europe and on trucks [and/or] Rail from California to the east coast arriving late in the quarter, but this is still the right time to reduce the wave for a smoother and more efficient pace of delivery.

The right principle is to take the most efficient measures possible, as if we were unlisted and the term “end of quarter” didn’t exist.

Thanks very much,
Elon

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