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Tesla is facing production challenges from two of its new factories in America and Germany, and is also weathering supply chain constraints.
According to Tesla (NASDAQ: TSLA) CEO Elon Musk, the electric vehicle (EV) manufacturer’s new factories are “gigantic money furnaces”. Musk made this comment specifically referring to Tesla’s new factories in Austin, Texas in the US, and Berlin, Germany. Interestingly, these comments preceded a staff layoff announcement.
Tesla’s attempt to firmly establish its Austin and Berlin plants previously hit headwinds. This is because the EV manufacturer was also weathering Covid-induced lockdowns at its Shanghai plant, according to Musk. In fact, the company recently suggested that it was still trying to pick up the pace from the substantial productivity drop caused by China.
New Tesla Factories in Austin, Berlin Causing Drag on Production
Tesla is currently trying to ramp up production in order to meet surplus demand. Regardless, Musk, in an interview with Tesla Owners of Silicon Valley, said that the Austin and Berlin plants are burning “billions of dollars”. In the video interview held in May, Musk also spoke about the decision to lay off employees. According to the Tesla boss, this layoff is necessary to cut costs the EV maker is constantly incurring.
Musk also intimated in a media session at the Qatar Economic Forum that the downsizing will take place over the next three months. The CEO specified that it would affect 10% of Tesla’s salaried workers or 3.5% of the company’s global workforce.
Battery Scarcity, Supply Constraints
In the May 31st interview, Musk revealed that Tesla faces an uphill battle as it tries to increase production. According to him, increasing production of the Model Y SUVs is proving difficult because Tesla’s new 4680 cells battery and structurally integrated battery pack are not enough. To keep up with soaring demand for its products, Tesla has made some concessions.
In an April shareholder letter, the EV maker revealed that it would start manufacturing Model Y SUVs using the older 2170 cells in Austin. However, that production strategy has also hit a snag as the tools required are currently stuck in China. Nonetheless, the Tesla CEO remains upbeat about the future prospects of the battery situation from a production point of view. Concerning output at the Austin factory, Musk stated:
“This is all going to get fixed real fast, but it requires a lot of attention, and it will take more effort to get this factory to high volume production than it took to build it in the first place.”
In addition, the billionaire businessman intimated that Tesla’s Berlin plant is in a marginally more favorable situation. This is because the EV firm priorly outfitted it to manufacture cars using the 2170 cells.
Tesla’s eventual goal is to make vehicle distribution easy and cheap across the world’s biggest markets. The company is trying to achieve this by building new factories in different cities in the world. With more factories, Tesla can increase its yearly projection and annual production volume.