Photo: Screenshot from Tesla Live feed presentation
While vehicle deliveries were delayed for most brands throughout 2021 due to the chip shortage and other issues, a recent memo from Elon Musk stands out as being unusual. Tesla's CEO urged company employees to stop rushing orders to obtain record deliveries and focus on reducing costs instead.
Last year, Tesla Motors delivered almost 500,000 vehicles, but the first three quarters of 2021 brought an excess of 637,000 units delivered. That is a serious increase in deliveries, but customers still must wait months to get the vehicles they wanted.
At this point, you might ask yourself why the CEO of a company would ask employees to avoid rushing into deliveries. Well, the answer is simple, and it is provided in the memo that was emailed to employees and obtained by CNBC. Rushing to deliver vehicles in Q4 brings increased spending on overtime, temporary contractors, and expedite fees.
As Elon Musk pointed out in the memo, this is a historic occurrence within the company, and it is followed by a "massive drop in deliveries in the first few weeks of the new quarter."
Musk points out that the effects of this rush over six months are that there is no effective boost in deliveries, but just an increase in expenses to accelerate deliveries in the last two weeks of each quarter, which leads to burnout among employees.
Going forward, Elon Musk wants to obtain "a steadier and more efficient pace of deliveries." The latter would bring more predictability to the company, which is something that would be appreciated by customers, employees, and stockholders.
Tesla has not provided a target for deliveries in 2021, which means that there would be no reason for a rush to get as many as possible by the end of the quarter, except for bragging rights. However, those who have ordered a Tesla vehicle and are waiting for it to arrive will have a different opinion on the matter.
As usual, when discussing a matter of cost per unit, actions that increase the expenditure for the delivery of a vehicle might be ignored at first, but they can lead to excessive costs if they happen to more units.
Imagine having to spend an extra $5 on the delivery of a new vehicle. If you put the $5 next to the price of a new vehicle, it would be a drop in the ocean, but multiply the $5 by the number of deliveries, and you end up with a nightmare.
At this point, you might ask yourself why the CEO of a company would ask employees to avoid rushing into deliveries. Well, the answer is simple, and it is provided in the memo that was emailed to employees and obtained by CNBC. Rushing to deliver vehicles in Q4 brings increased spending on overtime, temporary contractors, and expedite fees.
As Elon Musk pointed out in the memo, this is a historic occurrence within the company, and it is followed by a "massive drop in deliveries in the first few weeks of the new quarter."
Musk points out that the effects of this rush over six months are that there is no effective boost in deliveries, but just an increase in expenses to accelerate deliveries in the last two weeks of each quarter, which leads to burnout among employees.
Going forward, Elon Musk wants to obtain "a steadier and more efficient pace of deliveries." The latter would bring more predictability to the company, which is something that would be appreciated by customers, employees, and stockholders.
Tesla has not provided a target for deliveries in 2021, which means that there would be no reason for a rush to get as many as possible by the end of the quarter, except for bragging rights. However, those who have ordered a Tesla vehicle and are waiting for it to arrive will have a different opinion on the matter.
As usual, when discussing a matter of cost per unit, actions that increase the expenditure for the delivery of a vehicle might be ignored at first, but they can lead to excessive costs if they happen to more units.
Imagine having to spend an extra $5 on the delivery of a new vehicle. If you put the $5 next to the price of a new vehicle, it would be a drop in the ocean, but multiply the $5 by the number of deliveries, and you end up with a nightmare.
Google News