Tesla’s Austin and Berlin Plants ‘Losing Billions’ Amid Supply Chain Issues: Musk

A new Tesla car is seen during the official opening of the new Tesla electric car manufacturing plant in Gruenheide, Germany on March 22, 2022. (Christian Marquardt - Pool/Getty Images)

Elon Musk said on Wednesday that Tesla’s new plants in Texas and Berlin are “losing billions of dollars” due to battery shortages and supply chain disruptions prompted by government mandated COVID-19 lockdowns in China.

Tesla opened its Austin-based Gigafactory in April of this year, while its Berlin-Brandenburg plant officially opened in March.

“Both Berlin and Austin factories are gigantic money furnaces right now. Okay? It’s really like a giant roaring sound, which is the sound of money on fire,” Musk said in an interview with Tesla Owners Silicon Valley, an official Tesla recognized club, in Austin, Texas, on May 31.

The last of the three-part interview was published on June 22.

Tesla’s Texas factory produces a “puny” number of cars because of challenges in increasing production of its new “4680” batteries and because the tools needed to make its conventional 2170 batteries are “stuck” at a port in China with “no one to actually move it,” he said.

Communist Party officials imposed stringent lockdowns on a number of Chinese cities earlier this year after COVID-19 infections began to surge again, leading to a persistent supply chain for a number of industries across the globe.

‘Going to Get Fixed’

Despite the issues, Musk appeared to be optimistic about the current situation, explaining: “this is all going to get fixed real fast but it requires a lot of attention and it will take more effort.”

Tesla’s factory in Berlin is in a “slightly better position” because it started with using the traditional 2170 style batteries for cars built there, he said.

Musk added that both factories are losing “billions of dollars right now” because “there is a tonne of expense and hardly any output.”

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“So getting Berlin and Austin functional and getting Shanghai back in the saddle, fully, are overwhelmingly our concerns. Everything else is a very small thing,” he said.

Another “overwhelming concern,” Musk said, is ensuring the factories keep operating and can pay people without Tesla going bankrupt.

“The past two years have been an absolute nightmare of supply chain interruptions, one thing after another, and we’re not out of it yet,” Musk said, referring to the COVID-19-related shutdowns in Shanghai, which affected vehicle production at both Tesla’s Shanghai factory and its California plant.

Business Challenges

Musks’ concerns over the factories in Texas and Berlin come after the businessman said he had fears regarding the U.S. economy, given its current volatility, and said Tesla would need to cut 10 percent of its salaried workforce after expanding rapidly.

The billionaire confirmed Tuesday that the electric vehicle maker’s cuts to salaried workers will amount to a roughly 3.5 percent reduction in total headcount at the company, although Musk said he expects the company’s headcount to be higher in salaried and hourly workers a year from now.

“We grew very fast on the salaried side,” Musk said in an interview with Bloomberg News Editor-in-Chief John Micklethwait at the Qatar Economic Forum.

Musk also said he believes a recession would likely happen in the United States in the near term.

“It is not a certainty, but it appears more likely than not,” he said.