Tesla Inc. is bleeding from the losses in its new plants amounting to billions of dollars, prompted by supply chain disruptions and COVID-19 restrictions, which made CEO Elon Musk mention the risk of the company going bankrupt.
In an interview with a Tesla owners group, Musk said that Tesla has experienced "an absolute nightmare of supply chain interruptions, one thing after another."
"We're not out of it yet. That's overwhelmingly our concern is how do we keep the factories operating so we can pay people and not go bankrupt," the tech mogul remarked.
Due to lockdowns relating to Covid across the city, Tesla's manufacturing in Shanghai was closed for weeks per a report published by ABC17. Additionally, Musk stated in the interview that Tesla is losing billions of dollars as a result of the two plants it opened in the quarter in Texas and Germany due to supply chain difficulties that have resulted in "puny" production until now.
However, some predict that the automotive company is nearing the end of its most challenging quarter financially in more than two years.
"This is all going to get fixed real fast," Elon Musk said.
Bigger Problems
One of the company's critics believes that the risk of Tesla Bankrupt still looms as it is still bothered by greater financial woes.
In an interview with CNN Business on Thursday, Gordon Johnson of GLJ Research said, "Bankruptcy is a real risk" for Elon Musk's company and others.
Johnson explained: "A lot of their cash is locked up in China. They weren't profitable until they were in China; and, given China does not allow companies to repatriate dollars made there out of the country, Tesla has a real problem."
He also pointed out that another sign of Tesla's Bankrupt risk is its decision to slash around 10% of its salaried staff even as it continues to hire hourly production workers.
During the interview, Musk stated that Tesla's overwhelming concern is "How do we keep the factories operating so we can pay people and not go bankrupt?"
Some Positive Signs
The Covid-19-related shutdowns in Shanghai, according to Elon Musk, "were very, very difficult," and they had an impact on both Tesla's California factory and its Shanghai plant, which both produce cars and require parts from China, per Asia Financial.
According to an internal memo, Tesla intends to suspend the majority of production at its Shanghai facility during the first two weeks of July to work on an upgrade to the facility that will increase production.
Musk appears to be looking for a silver lining by claiming that its Berlin factory is in a "somewhat better position" because it initially started utilizing the conventional 2170 batteries for cars made there,
Tesla's Cybertruck electric pickup truck production, which has been delayed, is also anticipated to begin in mid-2023, Musk noted.
Adjusted earnings, which were at a record $3.7 billion in the first quarter for Tesla, are expected to drop to $2.5 billion in the second quarter, as per analysts polled by Refinitiv. Even so, it would result in an increase above the adjusted income of $1.6 billion in the second quarter of 2021.
In trading on Thursday at noon, shares of Tesla were down about 2%.
Elon Musk also brought up birthrates, fully autonomous driving, and advertising later in his lengthy talk. Tesla is considering advertising to garner more favorable media exposure. Musk thinks that editorial judgments are influenced by advertising, according to a report from Barron's.
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