Elon Musk told Tesla (TSLA) employees that “this is the craziest month of deliveries Tesla will ever have”.
The CEO stated that Tesla is again trying to stop its draining end-of-quarter delivery pushes, but he expects a big one this quarter.
Tesla has been known to have intense end-of-quarter delivery pushes due to its distribution system, which is very different from other automakers who use third-party dealerships.
Since Tesla sells directly to customers, the automaker owns the vehicle until it is fully delivered to the buyer and paid for.
It results in transit times being extremely important for Tesla financially since the automaker takes on the cost of building those cars and doesn’t get any money until the customers can actually pick them up.
Therefore, when Tesla has a lot of vehicles in transit at the end of a quarter, the quarter looks bad for them financially.
It’s why Tesla tries to build vehicles for exportations at its Fremont factory and Gigafactory Shanghai early in the quarter and vehicles for local deliveries later in order to allow for transit time by the end of the quarter.
However, this strategy results in Tesla’s sales and delivery team having to handle significant volumes of vehicles to deliver toward the end of each quarter, which are called “delivery waves” or “delivery pushes”.
CEO Elon Musk has previously indicated that Tesla is aiming to reduce those waves since they put a lot of stress on employees and have been known to affect customer experience.
It has yet to happen and it will certainly not be this quarter, but it might finally end relatively soon.
Last night, Musk held a company-wide call with Tesla employees where he told them to expect a “crazy” end of the quarter, according to sources who were on the call and told Electrek.
The CEO said:
“This month will be the craziest month for deliveries Tesla will ever have.”
Production issues due to the chip shortage and logistical issues due to bottleneck at ports as well as more recently natural disasters in the US have delayed deliveries for Tesla.
Those issues will add to the usual strain of the end-of-quarter delivery wave and it will make the next few weeks extremely important and challenging in terms of deliveries for the quarter.
The silver-lining is that Musk claimed that it’s not only going to be the craziest month for deliveries Tesla ever had but also will ever have.
The CEO believes that Tesla should get a better handle on its logistics and he aims for the automaker to put a stop to those delivery waves by Q4 2021 or Q1 2022.
It coincides with the ramp up of production at Gigafactory Berlin, which is expected to start production in October.
Tesla delivers a lot of vehicles in Europe and those vehicles are currently coming by ships from the US and China.
If the automaker can make some of those locally, it will reduce transit times for those vehicles and free up more production capacity for a steadier supply of vehicles for local deliveries in China and North America.