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Elon Musk: Tesla needs to cut costs or it will run out of money in 10 months

Published May 20th, 2019 2:06PM EDT
Elon Musk Tesla
Image: Ena/AP/REX/Shutterstock

Defying skeptics, Tesla during the September quarter of 2018 actually managed to turn a profit of $312 million thanks to strong demand for the mass market Model 3. Tesla’s profits for the quarter were far from staggering, but it nonetheless instilled faith that the electric automaker was on a path towards financial viability.

Just a few months later, the narrative surrounding Tesla has drastically shifted. When the company last month released its earnings report for the March quarter, it posted a quarterly loss of $702 million. That said, it’s worth noting that production, deliveries, and demand for Tesla vehicles have all grown at an impressive clip over the past many months. As an illustrative example, Tesla during Q1 of 2019 manufactured 77,100 vehicles, a figure which well more than double the amount it manufactured during the same quarter in 2018.

Nonetheless, Tesla continues to burn through money at an alarming rate. So much so, in fact, that Tesla CEO Elon Musk recently sent an email (obtained via Electrek) wherein the Tesla CEO explained that the company — which has approximately $2.2 billion in cash on hand — may not have enough cash to last beyond a period of 10 months.

“This is a lot of money,” Musk said, “but actually only gives us about 10 months at the Q1 burn rate to achieve breakeven!”

Consequently, Musk explained that the company will be taking a much closer look at employee expenses as it pertains to “parts, salary, travel expenses, and rent.”

Musk conceded that the soon to be implemented cost-cutting measures are “hardcore,” adding that it’s the “only way for Tesla to become financially sustainable and succeed in our goal of helping make the world environmentally sustainable.”

This isn’t the first time Musk has rung the alarm bells about drastically cutting costs, but it remains to be seen what the company can do within a 10-month timeframe.

Yoni Heisler Contributor

Yoni Heisler has been writing about Apple and the tech industry at large for over 15 years. A life long Mac user and Apple expert, his writing has appeared in Edible Apple, Network World, MacLife, Macworld UK, and TUAW. When not analyzing the latest happenings with Apple, Yoni enjoys catching Improv shows in Chicago, playing soccer, and cultivating new TV show addictions.