When you have multi-billion dollar businesses, your revenue, but your losses on a weekly or monthly basis as well are counted in billions of dollars as well. For Elon Musk, this counting and thinking in billions is a daily routine. He is the wealthiest person in the world for quite some time now, reaching wealth highs that have not been seen until now.
Due to the current situation in which the world is today, the automotive industry, and all industries for that matter, suffer great losses. Tesla is no exception. Tesla, as a multi-billion dollar business, suffers billions of dollars due to issues with supply chains, Covid lockdown, and delivery time.
Elon Musk Suggests He Might Go Broke In The Following Period – Will Tesla Avoid Bankruptcy?
The biggest cut down of them all is the supply chain issue. Due to missing raw materials for producing PCBs, the automotive industry, in general, is unable to resume its work at the same pace as before the crisis. The Tesla CEO, Elon Musk doesn’t avoid mentioning this in a recent interview.
“The past two years have been an absolute nightmare of supply chain interruptions, one thing after another.” – Musk says during an interview with a Tesla owners group.
The Tesla CEO is not afraid to warn the world about all disasters and difficult times that may be hiding behind the corner as the time passes. He is vocal almost all the time and speaks about it without hiding his intentions.
“We’re not out of it yet. That’s overwhelmingly our concern is how do we keep the factories operating so we can pay people and not go bankrupt.”
This period is indeed one of Tesla’s most difficult and challenging. They faced lockdowns around the world, they faced various restrictions around the places they have factories, etc.
Take for example Tesla’s plant in Shanghai. It was shut for several weeks in the recent period due to a recent Covid outbreak in the area. When one of the factories is not working this creates a chain reaction that costs massive stoppages in the production in other factories as well.
“This is all going to get fixed real fast.” – Elon says. “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. Bigger than a dumpster fire. A dumpster is too small. Berlin and Austin are losing billions of dollars right now. There’s a ton of expense and hardly any output.”
Elon is not alone in this way of thinking as well. Many analysts and critics around the world are warning about the massive danger of bankruptcy for many factories.
“Bankruptcy is a real risk for these guys.” – Gordon Johnson of GLJ Research says for CNN Business Thursday. “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.”
They do not point out China as the only issue that Tesla might have. Johnson, for example, points out the decision for cutting the workforce by 10% that Elon informs about.
“Why do you think they are cutting people? That’s a key tell-tell signal.” – Johnson says.
And he is most probably right. Why would someone cut the workforce if they are not facing or expecting a dangerous fall in revenue? This cutting of personnel might indeed help and slow down the process of going broke. 10% fewer workers mean 10% fewer people that take salaries. But will it indeed solve the situation?
According to other analysts, it is highly unlikely that Tesla might go bankrupt. The company is making a high profit since 2018. Despite the supply chain issues that they are facing now, the expectancy is that they will remain profitable.
In the first quarter of the year, despite all restrictions and issues, Tesla made a record-breaking profit of $3.7 billion. In the second quarter, analysts say that the company will make $2.5 billion of profit. Even though this is significantly less than the first quarter, it is still a considerable amount of money. Furthermore, it is still almost double than what the company made back in the first quarter of 2021.
Tesla, as an automotive company faced a significantly low dip in production of new vehicles of 0.1% in the first quarter. But compared to all fellow automotive companies it is still amongst the top few producers of vehicles. While many automotive companies scaled down on production, Tesla did a leap of 69% compared to the past year.
On the other hand, when you have a look at the stock market price of the company, you can indeed see the true picture of the whole situation. Since this period in 2021, the company faces a leap of 7%. Yes, it is true, there was a giant leap of about 100% back in November. The stock market price then topped at $1222, but again, the company is on a constant rise year after year. Moreover, all this is happening at a time of raging pandemic, global crisis due to the ongoing war, and massive inflation.
At the same time, let’s not forget the ongoing negotiations for buying Twitter. At a critical time, as Elon says, he makes a choice to invest around a fifth of his total net worth in a social media platform. In something that is not so familiar to him. So while criticizing the situation in which his companies are, he makes a massive trade. This is one of the biggest trades done in the past several years.
So having all the above in mind, do you think that Elon’s concerns are based, or he is just using it as a way to let go of unnecessary staff?
