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Investors still worry over Model S demand/production and ways to keep costs down after the huge fourth quarter loss

Tesla CEO Elon Musk told analysts and reporters that his company expects to be profitable in the first quarter, but that didn't stop investors from sending shares down due to previous Tesla woes.

Not only did Musk say Tesla would turn a profit next quarter, but also mentioned that the automaker would meet demand for 20,000 Model S sedans for 2013. In addition, he showed that revenue grew 500 percent to $306 million and that he had plans to get Tesla's gross margins up to about 25 percent.

You'd think all of this would be music to investors' ears, but shares took a 6 percent tumble in after-hours trading. This was mainly due to the fact that Tesla had a huge fourth quarter loss of $89.9 million (compared to $81.5 million a year earlier) as well as concerns about Model S demand and a lack of understanding how Tesla will keep costs down.

Musk attempted to address investor concerns, saying that Model S reservations increased by 6,000 in the fourth quarter, which is a significant increase from 2,900 in the previous quarter. Also, Musk said Tesla will make 500 Model S' a week and hopes to ship 4,500 cars from the Silicon Valley factory this quarter.


To keep costs down, Tesla plans to get rid of part-time workers and keep full-time workers at 50 hours per week (and adjust only to meet shipping commitments). Also, with production increasing, Musk said suppliers are likely to give more competitive prices.

"We are not demand constrained," Musk said. "We are intentionally production constrained. We're on track to sell every car we make. We could say goodbye to every store and every salesperson (today) and still meet that target."

The Model S was named Automobile Magazine's 2013 Automobile of the Year, but recently had some issues when a journalist from The New York Times took a test drive this winter and reported a horrific venture. More specifically, he said that the Model S doesn't have the range Tesla said it does, and ended up on a flatbed truck at the end of the trip. Musk and the NYT journalist (John Broder) ended up feuding over the matter.

Sources: The Detroit News, Bloomberg BusinessWeek



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Chinese method to reduce cost
By siliconvideo on 2/21/2013 2:39:56 PM , Rating: 2
So in reality Tesla is reducing labor costs by forcing all full time employees to work 50 hour weeks effectively reducing the cost per labor hour by 25%. They also got rid of the part time works since if you increased their hours Tesla would have to provide health care for them or pay the Obamacare fine for not providing health plans for these part time workers who probably will go over the 30 hour limit.

Cheap labor is the key.




RE: Chinese method to reduce cost
By Shig on 2/21/2013 5:57:20 PM , Rating: 2
The sobering reality is that their factory really doesn't need that many humans at all. It's one of the most heavily automated factories in the world.

It's called overtime...some people actually like to work overtime because you can make an insane amount of extra money. They weren't working 50 hour weeks, they were working 68 hour weeks. No pain, no gain.

Every business in the world does the part time worker thing...God forbid everyone got healthcare.


RE: Chinese method to reduce cost
By JediJeb on 2/24/2013 8:12:10 PM , Rating: 2
Nothing than any other car plant in the country does. My cousin worked for Ford building Rangers and Explorers and there they worked 5 ten hour days and as much as they could on Saturday and sometimes Sunday. 58 hour weeks were not out of the normal at all.


"A politician stumbles over himself... Then they pick it out. They edit it. He runs the clip, and then he makes a funny face, and the whole audience has a Pavlovian response." -- Joe Scarborough on John Stewart over Jim Cramer














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