Musk has been in a crisis lately. A week ago, Lei Fengwang (search "Lei Feng Net" public concern) reported that a rocket of SpaceX exploded before the test flight, resulting in the destruction of 200 million U.S. dollars worth of Facebook's first Internet communication satellite carried inside the rocket. Today, Tesla, another of his companies, has to work hard to cut spending and turn around.
According to Bloomberg News, Musk issued an internal email to employees at the end of last month (see full text below), stating that he would “reduce any unnecessary expenses†and strive to achieve positive cash flow in the third quarter.
The reason for this is to appeal to investors. Musk pointed out in an email that Tesla would be profitable if it had to tell investors before the Model 3 was mass-produced, but mass production would not be realized until the end of next year. Lei Fengnet learned that since its listing in 2003, Tesla had only earned 11.2 million U.S. dollars in the first quarter of its listing year, and has been losing money since then. In the first half of this year, Tesla’s adjusted loss was $568 million, which is already 64% of the amount of losses last year.
While the loss continued, Tesla’s spending was not optimistic and, as Musk said, “walking on the bladeâ€.
The company released Model 3, a low-priced electric car, in April this year, but it may not be able to create a good income until 2018 the following year. Tesla plans to rebuild the plant by 2018 with production of 500,000 vehicles. In order to reduce costs while serving low-cost Model 3 cars, Tesla is also building a Gigafactory battery plant to mass produce batteries. The factory will start construction in Nevada in the fourth quarter of this year.
According to CNN, in order to maintain operations, Tesla may have to sell shares. In the face of this difficult Tesla, are you also ready to buy a Model 3 support?
The following is the full text of Musk's mail:
In my opinion, it is necessary to tell everyone directly how important this quarter is to the company. The third quarter is our last chance to tell investors that Tesla will have at least positive cash flow and be profitable before the Model 3 volume production. By the fourth quarter, the expense of Model 3 will make us in a disadvantageous position, which will ease after the mass production of Model 3, but the mass production will not be realized until the end of next year.
We are now walking above the blade and we need a good third quarter performance. This requires us to reduce any unnecessary costs at least for the next four and a half while producing and contributing each domestic vehicle. At present, we are still a few percent negative in cash flow and GAAP (generally accepted accounting standards) earnings. But the problem is not great. I am confident that we can team up and make the results positive. Wall Street always sings antipathy, saying that Tesla will only lose money, but we have to fight their faces. It's very cool.
More importantly, we have to prepare additional funds in the fourth quarter for the completion of the Model 3 depot and the Gigafactory battery plant. In this way, our form will be more favorable, and we can persuade investors to support us, and the news headlines will not be "Tezira has lost money again!", but "beyond expectations! Tesla is profitable!". This feels great.
Thank you for your efforts for the company and look forward to celebrating the victory together.
Elon