Elon Musk told staff that Tesla has to "get smarter" about spending money © Getty Images
Elon Musk told staff that Tesla has to "get smarter" about spending money © Getty Images

Elon Musk calls on staff to cut costs in 'tough game of pennies'

2 December 2020

Elon Musk has called on Tesla staff to come up with ideas to save money in what he described as a “tough game of pennies”.

In an email to staff titled “Costs are extremely important!” Musk said thousands of good ideas were needed to reduce costs associated with parts, processes and designs.

“At a time like this, when our stock is reaching new heights, it may seem as though spending carefully is not as important. This is definitely not true!” he said in the email, obtained by CNBC.

“When looking at our actual profitability, it is very low around 1% for the past year. Investors are giving us a lot of credit for future profitability but if, at any point, they conclude that’s not going to happen, our stock will immediately get crushed like a souffle under a sledgehammer!”

The company is valued at $554bn but only started making a profit in 2019.

Between 2014 and 2018, research and development expenses have increased three-fold for electric vehicle batteries and charging infrastructure, while “more than expected” was spent on ramping up production of Model 3 sedans due to battery complexities and the automated manufacturing process, according to Statista.

In a report on 2020 third quarter earnings Tesla said it planned to in-source some of its battery manufacturing.

“In order to make our cars affordable, we have to get smarter about how we spend money,” said Musk in the email.

“This is a tough Game of Pennies, requiring thousands of good ideas to improve part cost, a factory process, or simplify the design while increasing quality and capabilities. A great idea would be one that saves $5, but the vast majority are $0.50 here or $0.20 there.”

The pandemic has impacted production, with Tesla temporarily closing the California and Shanghai factories in the first quarter due to coronavirus health concerns and restrictions put in place by the Chinese government.  

Last month, two recalls were reportedly issued on 9,500 Model X and Model Y cars due to possible safety risks from loose bolts and a potentially faulty roof trim.

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