Musk Calls Tesla’s Berlin, Austin Plants ‘Money Furnaces’ Amid Startup Snags

In the future, new plants in Germany and Texas will help the electric-car maker dramatically boost output, but for now they are losing billions of dollars.

The founder of the company made comments in an interview with fans from the Silicon Valley group that were recorded at the Austin factory on May 31 and posted to the social networking site. Two more segments of their chat with Musk have been posted.

Berlin and Austin are huge money furnace. It sounds like money is on fire. Berlin and Austin are losing billions of dollars because of a lot of expenses.

His three-week-old comments come as the company closes out a more turbulent quarter marked by a dramatic slowdown in production, widespread job cuts and a volatile share price. Despite the obvious challenges in China stemming from the recent Covid outbreak, Musk was relatively optimistic about the outlook for the second quarter.

Musk told the group that the Berlin plant is doing better in its startup phase though it is still building cars below expectations. In Austin, the problem is that the new 4680 battery cells are taking longer to produce in volume than expected, as well as a new "structural" battery pack that is intended to eventually help hold down the overall cost of its Model Y.

The factory in Austin is losing money because they should be putting more cars from the factory. The structural pack at ramp was a challenge.

The tooling needed for making 2170 variant cars is stuck in China and the plant couldn't quickly shift back to using the 2170 battery cells.

Shortly after his interview was posted on social media, a Morgan Stanley analyst cut his second-quarter estimates for the company. The company is expected to deliver 270,000 units in the quarter, down from 316,000.

Most of the shortfall made up for in 2H volume and higher pricing was marked to market.

China's strict public health rules to stop the spread of the coronaviruses that began in late March temporarily halted the production ofTesla's factory at the beginning of April and held production below its capacity through May The plant is expected to produce 115,300 units in the quarter, down from 178,887 in the first three months of the year.

Over the past decade, Musk has been through many cycles of production and factory headaches.

It will take a lot of attention, but it will be fixed quickly. It will take more effort to get this factory to be a high volume producer than it did to build it. He said the same thing in the interview. Getting Berlin and Austin functional is our main concern. Everything else is insignificant.

In after-hours trading, the shares dipped to about $706 after falling less than 1%. The stock is down a lot.