Tesla CEO Elon Musk has told the company’s employees to not sprint to make deliveries by the end of this quarter and to instead focus on minimizing costs. In the November 26th memo, Musk wrote that he doesn’t want the company “spending heavily on expediting fees, overtime and temporary contractors just so that cars arrive in Q4.”
Shares of Tesla closed up 5% on Monday after CEO Elon Musk issued a memo to employees. He urged them to focus on minimizing costs, instead of rushing orders out last minute to hit the company’s end-of-quarter sales targets.
“What has happened historically is that we sprint like crazy at end of the quarter to maximize deliveries, but then deliveries drop massively in the first few weeks of the next quarter,” Musk said. “In effect, looked at over a six month period, we won’t have delivered any extra cars but we will have spent a lot of money and burned ourselves out to accelerate deliveries in the last two weeks of each quarter.”
The Tesla CEO added that the company has a “big wave of deliveries” being made in the last few weeks of December. But it hadn’t achieved high volume production of cars in Europe or Texas yet. For instance, many cars are being transported on boats from China. Tesla has a Gigafactory in Shanghai that has a production capacity of 450,000 electric vehicles per year, to Europe.
This year, Tesla has struggled to deliver new cars to customers in the U.S. in line with originally promised date ranges. Some Tesla customers here experienced delivery delays of months. They leave customers paying out of pocket for rentals and ride-hailing apps, and needing to re-apply for loans due to slipped deadlines.
Still, sales have grown this year for Tesla. Vehicle deliveries, which are the closest approximation to sales, amounted to about 500,000 total in 2020.
The company is also reportedly making progress on its first European factory in Brandenburg, Germany, according to German auto news site Automobilwoche. Tesla intended to start production of vehicles by the early summer of 2021 in Germany. But factory construction was delayed following a court order impelled by environmentalists. They said their construction activity could harm hibernating snakes and lizards.
Vehicle deliveries, which are the closest approximation to sales reported by Elon Musk’s electric vehicle and renewable energy business, amounted to about 500,000 total in 2020. During the first three quarters of 2021, Tesla had already reported deliveries of 627,350 vehicles.
Since the start of 2021, the company has not provided a clear target for 2021 vehicle deliveries. But Tesla has reiterated its loose guidance for “50% average annual growth in vehicle deliveries” over a multiyear horizon, including on its third-quarter earnings call.
The idea is that Tesla sells and delivers as many cars as it has already been shipping but in a more staggered way. “Take the most efficient action, as if we were not publicly traded and the notion ‘end of the quarter’ didn’t exist,” he added.