Tesla to Implement Heavy Expense Cuts | Financial Buzz

Tesla to Implement Heavy Expense Cuts

Elon Musk sent out an all-staff email to employees of Tesla, Inc. (NASDAQ: TSLA) reviewed by Reuters, which stated that the Company would run out of cash within 10 months’ time if no major changes in operations were to be made.

The Company will go through a heavy expense cut under the leadership of Musk and the newly appointed Chief Financial Officer Zach Kirkhorn. They 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.”

The electric-vehicle manufacturer ended Q1 of 2019 with USD 2.2 Billion in cash but still suffered a loss of USD 702 Million. Although the company managed to raise another USD 2.7 Billion, Musk states that if the company were to experience the same burn rate as Q1 then it would definitely run out of cash within 10 months.

Elon Musk has plans to implement the use of autonomous driving robo-taxis to challenge the likes of Uber Technologies Inc. (NYSE: UBER) and Lyft Inc. (NASDAQ: LYFT) by 2020. Considering the difficulty to execute, part of the idea behind Musk’s concept is the Company’s current need for additional funds.

ARKInvest research suggests that the new USD 35,000 to USD 75,000 Model 3 sales would generate a minimum cash flow of about USD 10,000per year. Although the Company is known for its innovative ideas and their goal of helping make the world more environmentally sustainable, its primary focus for the foreseeable future is to gain more funding, all the while cutting expenses to the absolute minimum.