Tesla Facing Bankruptcy?

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Tesla Facing Bankruptcy?

Tesla has lost billions of dollars and could possibly go bankrupt.

According to CNN, American electric vehicle manufacturer Tesla faces billions of dollars in losses due to the construction of new production plants, supply chain issues and even pandemic-related movement restrictions. 

In a recent interview, the company's CEO, Elon Musk, said that his company could possibly go bankrupt because of such huge losses.

Elon Musk

"The past two years have been an absolute nightmare of supply chain interruptions, one thing after another," Musk said in an interview with a Tesla owners group. "We're not out of it yet. Our concern is how do we keep the factories operating so we can pay people and not go bankrupt," said Musk, as reported by CNN.

CNN Business noted that Tesla had reached the end of the most difficult quarter in two years, as part of its plant operations in Shanghai, China had to be shut down due to Covid-related movement restrictions in the city.

Tesla factory, Berlin

In the same interview, Musk also revealed that his factories in Berlin and Texas have caused the company to lose "billions of dollars" due to supply chain issues. The problem has slowed production, further reducing the number of completed cars - the CNN report mentions that the statement was already recorded late last May but was only revealed last week.

"Both Berlin and Austin factories are gigantic money furnaces right now. There's a giant roaring sound which is the sound of money on fire. 

One of Tesla's harshest critics, Gordon Johnson of GLJ Research, told CNN Business that he thinks the company is facing more significant financial problems than most analysts realise.

Tesla, China

"Bankruptcy is a real risk for these guys. Why? A lot of their cash is locked up in China. They weren't profitable until they were in China; and, given China does not allow companies to repatriate dollars made there out of the country, Tesla has a real problem."

Johnson pointed to Tesla's decision to cut about 10% of its salaried staff as a tell-tale sign — even as it continues to hire hourly production workers — as another sign of trouble.

"Why do you think they are cutting people? That's a key tell-tale signal," he said.

Tesla fleet of cars

Tesla reported its first quarterly net profit in two years in the third quarter of 2018 and recorded its best sales, profit, and revenue in the third quarter of last year. But the profits are seen to be coming to an end, according to an analyst study by Refinitiv, wrote the CNN report.

Analysts predict that Tesla's adjusted revenue in the second quarter of 2022 will drop to US $ 2.5 billion (RM11 billion), down from US $ 3.7 billion (RM16.3 billion) generated in the first quarter of 2022. However, the report notes that this is still an increase over adjusted revenue of US $ 1.6 billion (RM7.03 billion), which was recorded in the second quarter of 2021.

CNN also said that Tesla vehicle production remained down 0.1% in the first quarter of 2022 compared to the fourth quarter of 2021, although year-over-year production was 69% higher.

Adam Aubrey

Adam Aubrey

Content Producer

Wants to live the simple life, especially when it comes to cars and bikes. That's what tech is for he reckons, to make motoring simpler