Tesla needs to catch up on deliveries for record quarter, focus on cost, says Elon Musk in leaked email

In a newly leaked email to employees, Tesla CEO Elon Musk says that demand is strong this quarter, but they have “a lot of catching up” to do in order to achieve a record quarter.

They are focusing on delivery time and cost.

Last week, we reported on Musk sending an email to employees in which he said that Tesla is within reach of new record quarter for deliveries, but they need to ramp up production.

The CEO said that they already had more than 50,000 net new orders this quarter.

Electrek obtained another email sent by Musk to employees in which he reiterated that demand is strong, but he also said that they have to catch up on “a lot of vehicle deliveries”:

“While our demand is strong, we have a lot of vehicle deliveries to catch up to in order to have a successful quarter.”

Musk said that he will start holding calls with Tesla’s delivery teams around the world every two days in order to know “what’s needed to accelerate our rate of deliveries.”

Last year, we reported that Tesla formed a new delivery organization to take over the responsibilities of deliveries as volumes are rapidly increasing.

At the time, Tesla hired Kate Pearson, former Vice President Strategy, Operations and Digital Acceleration at Wal-Mart, to lead its new delivery operations.

It didn’t last long. Sources familiar with the matter told Electrek that Tesla has folded back delivery operations into the sales teams and Pearson is not at Tesla anymore.

In the new email today, Musk said that they need to focus on cost:

“We also need to address the total cost of getting a car from our factory to the customer. Last quarter, there were many expedites fees and routing inefficiencies that led to higher than expected delivery costs. This makes it much harder for to* break even.”

The CEO says that it still sees a record quarter within reach if they execute:

“Per my earlier email, if we execute well, Q2 will be an all-time record for Tesla vehicle deliveries and an awesome victory!!”

As previously reported, Tesla delivered a record of 90,700 cars in Q4 2018.

Electrek’s Take

It looks like people can finally stop arguing about the demand. Tesla appears to have it locked in for the quarter, which is impressive.

But deliveries appear to still be an important bottleneck.

Tesla does it virtually every quarter. They end up building up a large backlog of deliveries at the end of the quarter, which they need to complete in order to recognize revenue from the delivery within the quarter.

Elon has been talking about addressing this issue years ago, but it is still happening today.

I believe it’s due to Tesla’s direct sale business model. Unlike other automakers who sell most of their cars through third-party franchise dealerships, Tesla owns the entire sale structure and is responsible for the car all the way to the customer.

They need to find a way to stabilize sales and deliveries throughout the quarter and avoid a rush of deliveries at the end of each quarter.

Any ideas? Let us know in the comment section below.