Tesla Inc. will continue to cut everything that doesn't have a strong value justification so it doesn't run out of cash in 10 months, said CEO Elon Musk.
This draconian decision to scrimp on practically everything is part of what Musk calls "hardcore" cost-cutting efforts.
"This is a lot of money, but actually only gives us about 10 months at the Q1 burn rate to achieve breakeven!" Musk wrote to employees in an email last week. "This is hardcore, but it is the only way for Tesla to become financially sustainable and succeed in our goal of helping make the world environmentally sustainable."
The memo revealing Tesla's financial difficulties comes only a week after Tesla raised $2.7 billion it said it will use for general purposes after its cash position plummeted by over $1.5 billion dollars during the previous quarter.
Tesla first announced a capital raise in early May and said that it aimed to raise up to $2.3 billion. A day later, Tesla boosted its capital hike to $2.7 billion. Tesla sold some $860 million in shares and raised $1.84 billion in convertible notes.
Musk said he and CFO Zach Kirkhorn will review "all expenses of any kind anywhere in the world, including parts, salary, travel expenses, rent, literally every payment that leaves our bank account."
Tesla ended the first quarter of 2019 with $2.2 billion in cash but lost $702 million. In April, Musk said Tesla was going to have to go on a "spartan diet" to keep on going. Tesla then went on to raise the $2.7 billion to ensure the company's survival.
Analysts said Tesla has burned through massive amounts of money since it was founded in 2004. Tesla's all-consuming need for cash also follows a record year of revenue and deliveries that saw its electric vehicles (RVs) become market leaders in Europe and China. Tesla continues to face an existential crisis when it comes to money, and Musk's solution is to throw more cash at the problem and resort to a management style he's notorious for - micromanaging or "nano" managing, as he put it.
In 2018, Musk sent an email to Tesla employees saying he's having his finance people "comb through every expense worldwide, no matter how small, and cut everything that doesn't have a strong value justification."
He said he was "disappointed to discover" how many contractor companies Tesla was using as it boosted production of the Model 3, likening the structure to a Russian nesting doll.
Musk then flattened Tesla's organizational structure and vowed to remove the "barnacles" of contractors as part of a "company-wide restructuring." The company fired 9 percent of its workforce in June 2018.
As a justification for these harsh moves, Musk said in Tesla was "making this hard decision now so that we never have to do this again."
