Elon Musk, Tesla Promises to Increase Production by 1100%

Elon Musk (Scott Olson / Getty)
Scott Olson / Getty

Despite Tesla Motors Inc. never meeting any unit production targets or making a profit in the last five years, CEO Elon Musk told shareholders this week that through the magic of physics, he will revolutionize the auto industry to increase production by 1,100 percent, and profitably.

Musk stated on May 31 annual shareholder meeting that the Tesla team will employ “physics-first-principles” to shape a new mode of industrial production. He promises to bring “factors of 10 or even 100 times” to improve efficiency.

Lambasting the world’s top automotive factories for using outmoded and inefficient systems, Musk said, “We can make dramatic improvements to the machine that makes the machine. A lot of people will not believe us about this, but I am absolutely convinced this can be accomplished.”

Musk has always expressed huge confidence in the disruptive and transformative abilities of Tesla. But Breitbart News warned at the end of 2015 that Tesla was losing $19,810 on each car it sells, and hemorrhaging $51,344 in negative cash flow on each vehicle it delivered. The biggest reason for the huge losses was that the company continuously missed production targets.

As Tesla’s 2015 annual report states, “Sources of cash are predominately from our deliveries of vehicles, as well as customer deposits, sales of regulatory credits, proceeds from financing activities.” But the company’s biggest source of operating cash flow continues to be customer deposits.

In the first quarter of 2016, Tesla missed its 5,333 monthly delivery schedule by about 340 units a month. As a result, Tesla lost an extra $40 million in cash flow each month.

The company miraculously bailed itself out of a negative working capital deficit in April by collecting over $400 million in customer deposits for delivery of its $35,000 “affordable” mass-produced Model 3, beginning late next year.

But Breitbart News’ June 1 review of the Tesla Motors’ official customer Forum website reveals pages of Model S and Model X customers complaining about not receiving delivery of their promised electric vehicles this quarter and having no idea when they will be delivered.

Tesla admitted in its 10Q, filed with the US Securities & Exchange Commission released on May 10, that it has not finalized the Model 3 design and has has not selected its parts suppliers.

The company states that a major financial risk is its ability to produce and deliver the Model 3 in volume and on time, because the vehicle still needs to do “extensive testing” to make sure the car can meet quality standards and government regulations. If the company cannot “resolve any or all of these issues”, the 10Q states that Tesla Motors’ “brand, business, prospects, financial condition and operating results could be materially damaged.”

Musk expressed optimism at the shareholder’s meeting that Tesla’s recent planning exercise has illuminated methods that could increase production capacity exponentially: “The most important point I want to make is … that we’ve realized that the true difficulty and where the greatest potential lies is in building the factory.”

Musk added that a July 29 “grand opening” for Tesla’s huge “Gigafactory” lithium ion battery plant in northern Nevada gives him more confidence that Tesla can grow production from at least 50,000 vehicles a year in 2016, to over 500,000 in 2018, and a million cars a year by 2020.

But Musk failed to mention that the planned 5.5 million square foot Gigafactory is currently only about 800,000 square feet in size. It appears that Tesla so far has built a factory that is 86% smaller than its originally-planned size.

Musk closed the three-hour meeting by taking questions from shareholders, defending Tesla’s tax incentives, commenting on government loans and explaining labor practices.

But the biggest showstopper of the day was the admission that Model 3 buyers will not have access, at the base price, to Tesla’s North American “free long-distance charging” system currently available to all owners of the Model S and Model X.

Musk refused to give a price to Model 3 customers for charging access, but said, “It will still be very cheap, and far cheaper than buying gasoline.” Musk added, “But it will not be free long-distance charging for life unless you purchase that package.”



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