Elon Musk Urges Employees To Minimize Delivery Costs

Fremont, CA, USA - January 20, 2021: Tesla factory plant,  an American electric vehicle and clean energy company based in Palo Alto, California.
vzphotos / Getty Images

Tesla CEO Elon Musk asked his employees to try to minimize the cost of deliveries “rather than spending heavily on expedite fees, overtime and temporary contractors just so that cars arrive in Q4.”

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In an email obtained by CNBC, Musk said that historically, “we sprint like crazy at end of quarter to maximize deliveries, but then deliveries drop massively in the first few weeks of the next quarter. 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.”

Barron’s reports that automotive profit margins will improve if Tesla is spending less to deliver vehicles, adding it will be something to watch for when the company reports its fourth-quarter earnings at the end of January 2022.

Wall Street is looking for 266,000 vehicles delivered for the fourth quarter — which would be a record and bring full-year 2021 deliveries to just less than 900,000, according to Barron’s.

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Tesla delivered about 500,000 vehicles in 2020.

In the third quarter, Tesla announced it had delivered 241,300 vehicles, exceeding analysts’ expectations and despite global supply chain issues, as GOBankingRates previously reported. Analysts had predicted at the time that Tesla would deliver around 220,900 electric cars during this period, according to CFRA Research. 

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Tesla said it had produced 237,823, according to an announcement, adding, “We would like to thank our customers for their patience as we work through global supply chain and logistics challenges.” In comparison, in the second quarter, the company produced and delivered just over 200,000 vehicles.

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In October, Tesla said that its delivery count should be viewed as slightly conservative, “as we only count a car as delivered if it is transferred to the customer and all paperwork is correct.”

“Tesla vehicle deliveries represent only one measure of the company’s financial performance and should not be relied on as an indicator of quarterly financial results, which depend on a variety of factors, including the cost of sales, foreign exchange movements and mix of directly leased vehicles,” the company said.

Tesla’s stock is up 48.25% year-to-date. Musk ended his email saying,” The right principle is: take the most efficient action, as though we were not publicly traded and the notion of ‘end of quarter’ didn’t exist.”

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