Musk: Tesla Will See 'Crazy' Deliveries This Quarter
by Nina Abby on Jun 18, 2022
Recently, Tesla CEO Elon Musk told employees at an all-hands meeting that a "crazy" wave of deliveries is expected by the end of the quarter. Tesla has been trying to get rid of the end-of-quarter delivery wave, but due to special circumstances, the company is still unable to avoid the delivery wave at the end of the quarter.
It is reported that Tesla's own distribution system is very different from the car companies sold through third-party dealers, so the company's delivery efforts at the end of the quarter will be very large. Because Tesla sells cars directly to customers, vehicles are stored and owned by Tesla until customers pick them up and pay for them. Tesla's direct-selling model results in vehicle transit times having a disproportionate impact on its financials, as the company absorbs the cost of building the cars and doesn't have access to any funds until customers pick them up.
Therefore, when Tesla has a large number of vehicles in transit at the end of a quarter, the financial situation for the quarter could be very bad. So Tesla is trying to produce cars for export at its Fremont and Shanghai plants early in the quarter, and then produce vehicles for local deliveries later, to allow for transit time before the end of the quarter. (Read related news: Tesla Will Enter Thailand and Build A Factory in Indonesia)
However, this strategy has Tesla's sales and delivery teams juggling a large number of cars to be delivered at the end of each quarter, known as the "end of quarter delivery wave." The "end-of-season delivery wave" will not only increase Tesla's costs, but also affect the customer's car pickup experience. Tesla systematically delivers new cars to customers, who often have to rush to pick up their cars.
Late last year, Musk told employees that cost was more of a concern than a wave of deliveries. However, Musk said at a June 8 Tesla all-hands meeting that there will be a major wave of deliveries this quarter.
A Tesla employee asked Musk at the meeting when the delivery cycle would level off to avoid a "crazy end-of-quarter delivery wave." Musk replied, “Tesla has been facing this challenge since the end of 2008. There always seems to be something going on that makes end-of-quarter deliveries go crazy. This quarter will be no exception because of the huge challenges we face in Shanghai. Tesla temporarily closed its Shanghai factory for much of the beginning of the quarter, only now fully resuming production. This quarter will be very tense.”
Musk tried to reassure employees that Tesla's "delivery wave will be much smaller" at the end of the third quarter "if there are no surprises." With the ramp-up of the Berlin Gigafactory and the release of the Shanghai Gigafactory capacity, the situation should gradually improve. Currently, Tesla’s Shanghai Gigafactory exports a large number of cars to Europe. (Read related news: Where Will the New Tesla Factory Be Built? Musk: Consider Canada or Mexico )
Musk has previously said that Tesla may not break the delivery record due to the production suspension, but he suggested the company could still deliver nearly 300,000 vehicles.