Musk urges workers to show positive cash flow
Elon Musk sent an e-mail to employees at Tesla Motors Inc. urging them to cut costs and deliver “every car we possibly can” in a push to show positive cash flow in the third quarter.
The chief executive officer of the electric-car company said it would be his last chance to show improved financial numbers before he tries to raise more money. The third quarter is crucial to Tesla’s future because the company is trying to acquire SolarCity Corp. and preparing to roll out the Model 3, its lower-priced sedan, late next year.
“The simple reality of it is that we will be in a far better position to convince potential investors to bet on us if the headline is not Tesla Loses Money Again,’ but rather Tesla Defies All Expectations and Achieves Profitability.’” Musk wrote in an Aug. 29 e-mail obtained by Bloomberg on Friday. “That would be amazing!"
A Tesla spokesperson verified the authenticity of the e-mail.
The e-mail says that Tesla is “on the razor’s edge of achieving a good Q3, but it requires building and delivering every car we possibly can, while simultaneously trimming any cost that isn’t critical, at least for the next 4.5 weeks.”
Tesla delivered 50,568 vehicles in 2015 and has said it will deliver about 80,000 this year. It missed its first two quarterly sales targets and has not given guidance for the third quarter, but has said it will deliver 50,000 cars in the second half of the year.
“I thought it was important to write you a note directly to let you know how critical this quarter is,” Musk wrote. “The third quarter will be our last chance to show investors that Tesla can be at least slightly positive cash flow and profitable before the Model 3 reaches full production.”
The e-mail speaks to Musk’s way of rallying the troops at a company that’s been under intense scrutiny all summer. If the Securities and Exchange Commission approves the SolarCity deal, shareholders at both companies could vote on the merger as early as October. Meanwhile, Tesla is also retooling its factory in Fremont, California, in preparation for the Model 3, which is expected to begin selling at $35,000 before incentives. Musk said previously that Tesla plans to raise more money this year.
Musk also reaffirmed Tesla’s need for cash, writing that “we will need to raise additional cash in Q4 to complete the Model 3 vehicle and the Gigafactory” near Reno, Nevada, which will produce battery cells.
Tesla burned through $611 million in cash in the first half of this year and $2.2 billion last year, according to Bloomberg data. The company also lost $568 million on an adjusted bases in the first half of this year and lost $889 million last year.
“It would be awesome to throw a pie in the face of all naysayers on Wall Street who keep insisting that Tesla will always be a money loser!” Musk said.
To contact the reporter on this story: Dana Hull in San Francisco at email@example.com.