Elon Musk: Tesla almost went bankrupt during Model 3 ramp

Tesla boss Elon Musk has divulged just how close Tesla came to falling into bankruptcy during the ramp up to volume production of its Model 3 electric sedan.

With a $US401 billion market cap, Tesla is currently the world’s most valuable auto maker – worth more than double the next in line, Toyota.

But it is a title that has been hard won. Musk has made no secret of the “production hell” and “logistics insanity” that the company went through as it negotiated a two-year rite of passage from electric vehicle start-up to leading global EV manufacturer.

In a tweet on Wednesday evening (US time), Musk detailed some more of what he says was a period of “extreme stress and pain”.

“How close was Tesla from bankruptcy when bringing the Model 3 to mass production?” asked Twitter follower “Zain”.

“Closest we got was about a month. The Model 3 ramp was extreme stress & pain for a long time — from mid 2017 to mid 2019. Production & logistics hell,” said Musk.

Tesla commenced manufacturing the Tesla Model 3 – its third volume production model after the Model S and Model X and the one that was promised to deliver a price point that would appeal to the mass-market – in mid-2017.

In 2018, a decade after Tesla’s first dance with bankruptcy (a last-minute $US40 million bailout from Daimler saved the company on Christmas Eve), Musk agreed to work for free in return for the right to buy Tesla stock at the 2018 market price if he could increase the company’s profits, market capital value and revenue.

Its subsequent ramp up of Model 3 production was under such scrutiny that Bloomberg created the crowd-sourced Model 3 Vin Tracker, which has since been retired but was considered a good estimate of how Tesla’s weekly production rate was increasing.

By the end of 2019, twelve months after it added the logistical nightmare of shipping Model 3s globally (exports to Australia and New Zealand commenced in August), Tesla was producing around 6,000 Model 3 sedans a week from its Fremont factory.

Since then, it has ramped up production of the Model 3 at its first factory outside the US, in Shanghai, and added the Model Y into its Fremont production line.

These developments as well as the unveil of the Cybertruck, and starting construction on another two factories (Berlin, Germany and Austin, Texas), saw stock values soar in 2020, with the company’s continuing viability underlined by five consecutive profitable quarters.

That meteoric rise in value that has made Tesla the company’s most valuable by market cap has seen Musk’s stock option tranches meted out considerably faster than he had anticipated, according to another tweet by Musk on Wednesday evening.

Seemingly defending the stock options agreement which earned him more than $US11 billion ($A15.38 billion) while employees were furloughed due to the pandemic, Musk referred to his plan for humanity to colonise Mars, which drives his space exploration company, SpaceX.

Responding to James Stephenson, a follower and Tesla owner, Musk said, “Yes, although I didn’t expect the stock to rise so much so soon. The reason for the stock options is that they’re needed to help pay for humanity to get to Mars in 10 to 20 years.”

Despite a massive lead up to Tesla’s “Battery Day” which was held in September, and which was preceded by a five-to-one stock split, Tesla’s value has since stumbled somewhat, although analysts still consider it a “must own” stock.

While its stock value at the height of Battery Day anticipation exceeded $US2,000 prior to the split, values fell by around 10% as Tesla investors and analysts expressed disappointment at the long outlook in improving battery supply and efficiency put forward by Musk at the event.

Today’s close has Tesla stock values at $US423.90, and as the US begins counting federal election votes today, analysts note that the results of this election will have big implications for Tesla and the wider US EV market.

Trump’s anti-climate action and EV stance has been countered by presidential aspirant Joe Biden with a $US2 trillion climate and energy package that includes reinstating the full federal EV tax credit, compensating drivers for retiring old fossil-fuelled vehicles, and buying 3 million EVs for government fleets.

“A Biden win, coupled with Democrats taking control of the Senate, has the potential to shift the trajectory of electric vehicle adoption for years while reversing some of the damage inflicted by the current administration,” Bloomberg NEF analysts, led by Aleksandra O’Donovan said in a recent report.

Tesla reported its fifth consecutive profitable quarter in October and is now turning to focus on a Model Y ramp up in the US and completion of its Model Y-focussed Berlin gigafactory.