As Tesla flounders, a new star emerges

Tesla has started cost-cutting ahead of its June 30 end of second quarter balance date – a sure sign the Elon Musk run company sees a set of rotten figures emerging from its beancounters shortly.

 Media reports say the electric vehicle maker closed an office in San Mateo, California and laid off around 200 employees working on its Autopilot driver-assistant system.

US media reported most of those people sacked were hourly staff, not salaried – a move contrary to Musk’s tweets earlier in the month.

Early this month, Tesla Chief Executive Elon Musk told top managers he had a “super bad feeling” about the economy and that the maker of electric cars needed to cut staff by about 10%.

Musk later clarified his tweet saying the 10% cuts would apply only to salaried workers and that hourly staff numbers were still expected to grow.

“Tesla clearly is in a major cost-cutting mode,” said Raj Rajkumar, professor of electrical and computer engineering at Carnegie Mellon University, told Reuters

“This (staff reduction) likely indicates that 2Q 2022 has been pretty rough on the company due to the shutdown in Shanghai, raw material costs and supply chain problems.”

Anti-pandemic measures in Shanghai have cut Tesla’s production there.

Reuters reported that many people in Tesla’s San Mateo office work on data annotation – reviewing and labelling various visuals collected from Tesla vehicles to teach the cars’ Autopilot system how to handle certain kinds of road scenarios.

Musk has also said Tesla’s new factories in Texas and Berlin are “gigantic money furnaces” losing billions of dollars.

Tesla’s share price performance this year tells the story – the shares are down 43% year to date, despite record production and deliveries in the March quarter, record revenues and earnings.

The shares slid around 37% in the June quarter thanks to the problems in Shanghai and the Covid lockdowns there by the Chinese government.

But Musk’s bid to takeover Twitter in an expensive $US44 billion deal has also undermined investor confidence in the EV maker and its CEO.


Quietly investors have another major electric vehicle maker to look at in competition with the likes of Tesla, BYD in China, Nio in China and the fleet of pretenders in the US, Europe and the rest of the world.

Polestar started life in 2017 as a joint venture between Sweden’s Volvo Cars and Chinese auto giant Geely (which owns Volvo).

Shares of Polestar listed on Wall Street on Friday, making it the latest EV company to go public via a merger with a special purpose acquisition company, or SPAC.

Polestar’s stock started trading on Nasdaq one day after it completed its merger with the SPAC Gores Guggenheim. The EV maker’s shares ended the day at $US13.00, up 15.8% from the SPAC’s final closing price on Thursday.

That rise was quickly reversed in the final days of the quarter and the shares dropped more than 9% on Thursday to close at $US8.81

Polestar CEO Thomas Ingenlath told Reuters the company will use the $US890 million (over $A1.1 billion) raised from the deal to fund its three-year plan to build new vehicles and eventually become profitable.

SPAC mergers had, up to two months or so ago, been a more popular way for companies to go public. The corporate disclosures required were simpler than those in a traditional initial public offering or float.

But with the shakeout in markets from May and growing hints the US Securities and Exchange Commission will tighten disclosure rules for SPACs and enforce responsibility on directors and management, the Sparc route is looking problematic.

In fact, most SPAC mergers with electric vehicle companies haven’t done all that well for investors.

“Successful’ SPAC EV floats such as Lucid Group, Fisker and Nicola have all seen huge share price slides.

Lucid shares are down more than 65%, Fisker, close to 70% and Nikola shares have lost 92%.

Shares in EV truck maker Rivian boomed in the wake of its SPAC merger, especially with the likes of Amazon and Ford backing the company.

But its shares are down 84% from its post-IPO high, Ford has sold most of its holding and Amazon doesn’t seem as enthusiastic.

Analysts point out that Polestar at least has EVs on the road – around 55,000 in China, according to sales figures, helped by its 48% shareholder, Volvo.

Polestar has a factory operating in China and an assembly line is set to begin production later this year in a South Carolina factory shared with Volvo.

Polestar has plans to add three new models to its line up by 2025. It will have the compact Polestar 2 crossover built in China, a large SUV, the Polestar 3; a midsize crossover, the Polestar 4; and a large sedan, the Polestar 5.

All will be fully electric and all will be offered in the US, Europe and China. Polestar plans to build its vehicles in all three regions. By the end of 2025, the company expects to have annual sales of about 290,000 vehicles.

Polestar says it has received more than 32,000 orders for the Polestar 2 since the start of the year from customers in 25 different countries.

Polestar also got publicity earlier this year for an order from rental-car giant Hertz of 65,000 new EVs over the next five years. It was the second EV contract handed out by Hertz – it revealed a bigger, 100,000-unit order with Tesla

Polestar’s plans to be operating sales and service networks in 30 countries by the end of next year.

And if it needs more money the company says it will issue bonds, not shares, thereby keeping faith with the current holders and also preserving Volvo’s dominant minority stake.