Tesla, the American electric vehicle manufacturer, is facing billions of dollars in losses from new production plants, supply chain issues, and pandemic-related lockdowns, prompting CEO Elon Musk to mention bankruptcy in a recent interview.
Elon Musk was quoted as saying in an interview with a Tesla owner group:
“The past two years have been an absolute nightmare of supply chain interruptions, one thing after another. We’re not out of it yet; overwhelmingly our concern is how do we keep the factories operating so we can pay people and not go bankrupt.”
According to CNN, Tesla is nearing the end of its most difficult quarter in two years, owing in part to the shutdown of its Shanghai factory due to Covid-related lockdowns in the Chinese city.
Musk also revealed in the interview that the company’s factories in Berlin, Germany and Texas, United States are costing the company “billions of dollars” in losses due to supply chain issues, which have resulted in “puny” output thus far. Gordon Johnson of GLJ Research says:
“Bankruptcy is a real risk for Tesla, because a lot of their cash is locked up in China. Tesla was not profitable until venturing into China, and China does not allow companies to repatriate money made in the country, which presents Tesla with “a real problem.”
Analysts predict that Tesla’s adjusted earnings in Q2, 2022 will be $2.5 billion, down from $3.7 billion in Q1, 2022. According to the report, this would still be an increase over the adjusted income of US$1.6 billion recorded in the second quarter of 2021. According to CNN Business, Tesla’s vehicle production decreased by 0.1 percent in Q1 2022 compared to Q4 2021, despite being 69 percent higher year on year.
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