Read the email Elon Musk sent to Tesla employees about cutting shipping costs
Tesla’s Model Y compact crossovers at a showroom in Shanghai, China on January 18, 2021.
VCG | China Visual Group | Getty Images
Amid ongoing port constraints and rising shipping costs, Tesla CEO Elon Musk urged employees on Friday, in a company-wide email obtained by CNBC, to look for ways to reduce the cost of delivering electric vehicles to customers, rather than rushing last minute orders. meet their end-of-quarter sales targets.
This year, Tesla has struggled to deliver new cars to customers in the United States according to the date ranges originally promised. As CNBC previously reported, some Tesla customers here have experienced delivery delays of several months, leaving them to pay out of pocket for rentals and rideshare apps, and needing to re-apply for loans due to delayed deadlines.
Tesla isn’t alone in letting customers wait longer than they’d hoped for their new all-electric cars. Last week, for example, new public competitor Rivian Automotive informed people who had booked their R1S, a sport utility vehicle, of the delivery delays.
Still, sales have increased this year for Tesla seemingly adamant with unpredictable delivery dates.
Vehicle deliveries, which is the closest approximation to sales reported by Elon Musk’s electric vehicles and renewables business, totaled approximately 500,000 in 2020. In the first three quarters of 2021 , Tesla had already announced deliveries of 627,350 vehicles.
Since the start of 2021, the company has not provided a clear target for 2021 vehicle deliveries. But Tesla reiterated its rough forecast of “50% average annual growth in vehicle deliveries” over a multi-year horizon, including included in its call for third quarter results.
JL Warren Capital CEO and Chief Research Officer Junheng Li wrote in a note to investors last week that she expects Tesla sales to continue increasing, at least in China this quarter. “Soaring gas prices are benefiting all brands of new energy vehicles,” she noted in the country.
Some 1.3 million electric vehicles were sold in China in 2020, according to a Canalys study. The company predicted the number will rise to 1.9 million electric vehicle sales in China by the end of this year.
China remains the world’s largest market for new cars, with strong government support to go electric.
Here is the full email Elon Musk sent to all Tesla employees on Friday (transcribed by CNBC).
From: Elon Musk
Sousj. Fourth Quarter Deliveries Against Profitability
Date: November 26, 2021 [time stamp redacted]
From my email several weeks ago, our goal this quarter should be to minimize Cost deliveries rather than spending a lot of money on shipping, overtime, and temporary contractors just to get the cars into the fourth quarter.
What has happened historically is that we sprint like mad at the end of the quarter to maximize deliveries, but then deliveries drop massively in the first few weeks of the following quarter. This is because over a six month period we will not have delivered any additional cars but we will have spent a lot of money and we will be exhausted to speed up deliveries in the last two weeks of each quarter.
We will still have a pretty big wave of deliveries in the last few weeks of December as we do not yet have large volume production in neither Europe nor Texas which means a lot of cars on ships from China to the Europe and on trucks [and/or] California to East Coast rail coming late in the quarter, but it’s still a good time to start reducing wave size in favor of a smoother and more efficient delivery pace.
The good principle is to take the most effective action, as if we were not listed on the stock exchange and the notion of âend of quarterâ did not exist.