With its market cap hovering at $540 billion and its stock trading at ten times what it was worth a year ago, it’s easy to buy into the idea that Tesla (TSLA) is the world’s most valuable automaker. However, founder and boss Elon Musk isn’t blinded by his company’s overblown paper value and wants his executives to know that they shouldn’t be, either.
“At a time like this, when our stock is reaching new heights, it may seem as though spending carefully is not as important. This is definitely not true!” Musk told employees Tuesday in an internal email titled “Costs are extremely important!” The email was first reported by Electrek.
Musk noted that Tesla’s actual profitability is very low, registering at only 1 percent in 2019. “Investors are giving us a lot of credit for future profitability,” he wrote. “But if, at any point, they conclude that’s not going to happen, our stock will immediately get crushed like a soufflé under a sledgehammer!”
It’s not the first time Musk has sounded the alarm on Tesla’s share price. In May, just after Tesla stock hit a three-month peak on strong Q2 financial results, the CEO tweeted, seemingly out of the blue, that he thought Tesla’s stock price was too high.
The only way to prevent an ugly stock collapse is selling more cars while keeping costs as low as possible.
“This is a tough Game of Pennies,” Musk wrote in Tuesday’s email, “requiring thousands of good ideas to improve part cost, a factory process, or simplify the design while increasing quality and capabilities. A great idea would be one that saves $5, but the vast majority are $0.50 here or $0.20 there.”
Tesla already implemented a series of cost reduction measures in early 2020 when the coronavirus pandemic started weighing down global auto sales, firing an undisclosed number of workers after an annual performance review process and temporarily cutting some employees’ pay.
However, all that might not matter much if the company keeps burning billions of dollars elsewhere.
On Tesla’s third-quarter earnings call, the company’s CFO Zachary Kirkhorn said Tesla plans to ramp up its capital expenditures by $2 billion (from previously planned $2.5 billion) in 2021 and 2022 to fund new projects, such as battery cell manufacturing and a new Gigafactory in Germany.
On the other hand, with only four weeks left in 2020, Tesla is doing everything it can think of to boost year-end delivery.
Earlier this week, a number of Cybertruck reservation holders told Electrek that they’d received emails from Tesla encouraging them to lease existing Tesla vehicles while they wait for the yet-to-enter-production electric pickup truck.
Tesla has promised investors to deliver 500,000 vehicles in 2020. The company needs to deliver over 181,000 vehicles in the fourth quarter in order to achieve that goal. In the last quarter, the automaker delivered 141,000 vehicles.