Reduction of expenses in the Company
The head of Tesla believes that the company needs to focus on making profits and reducing costs to meet investor expectations.
Elon Musk has warned its employees that they need to focus on making a profit. Otherwise, Tesla shares could plummet. He said this in a letter to the company's employees, which was read by CNBC.
The CEO of Tesla Elon Musk said: "If you look at our actual profitability, it is very low around 1% over the past year. Investors are hoping for our future profits, and if they decide that we cannot make them, our shares will collapse immediately like a sledgehammer hit soufflé".
Musk also informed its employees about the need for greater savings. The publication specifies that such measures are needed, among other things, due to Tesla's desire to produce a more affordable electric car within three years.
Tesla shares are currently experiencing rapid growth, which led to a $100 billion increase in value for the company in November. As of 30 November, the market capitalisation of the electric car manufacturer was over $538 billion.
Tesla reported profits for the previous five consecutive quarters. However, the company has been able to earn primarily by selling ZEV loans (Zero-Emission Vehicle Credit) to other car manufacturers. Other companies buy them in order not to lose their licence to sell cars in some American states or in countries that are actively fighting against environmental pollution. Tesla has a lot of credits of this type because it exclusively produces electric cars.
As for cost-cutting, the company has already implemented such an initiative last year. In 2019, Musk and the CFO of Zach Kirkhorn, as part of the monitoring group, personally checked every payment, including the cost of spare parts, salaries and travel expenses.
We remind you that on 21 December, Tesla shares will be included in the S&P 500 broad market index. The company will be the most expensive inclusion in the history of the index its weight will exceed 1% of the total S&P 500. The growth of Tesla shares since the announcement of their inclusion in the S&P 500 already exceeds 40%. Quotations have increased by 560% since the beginning of the year.
