In this posting, the Supply Chain Matters blog reflects on Tesla Motors recently quarterly operations performance and the potential conflict relative to meeting shareholder expectations and social responsibility practices.

Tesla supply chain

Last week, business media amplified the Q2 delivered vehicles report by electric automaker Tesla Motors. The automaker reported that the company delivered upwards of 90,650 vehicles in the June ending quarter.

Our readers are likely aware that Tesla does not report details related to product sales, and thus quarterly operational and financial performance are utilized as indicators of sales trends. The automaker’s unique direct delivery model that has no reliance on a local auto dealer network generates a quarterly lag time between when a vehicle is produced, and when global based customers actually take delivery and execute final payment of their vehicles.

In the June ending quarter, the company reported the production of a total of 82,272 vehicles compared to the reported delivery of the upwards of 90,650 vehicles. The difference is mostly accounted for in the March ending quarter where 102,672 vehicles were produced with 88,400 delivered. The upwards of 14,000 vehicle difference was the adder for Q2.

In the very closely watched Model 3 volume production performance numbers the automaker reported a combination of 75,946 Model 3 and Model Y vehicles produced in the latest quarter, compared to the 87,282 vehicles produced in Q1 in these same two categories. The company does not report production output of its recently opened China manufacturing facility in Shanghai. Thus, it is difficult for outsiders to determine how both Model 3 production facilities managed to support production volumes under virus restrictions and worker outbreaks.

The delivery number was the context of U.S. manufacturing operations being locked down for several weeks  because of COVID-19 coronavirus spread in California. In May, CEO and technology icon Elon Musk blatantly defied local health authorities directives concerning conditions for restarting production operations at its U.S. manufacturing facility. Musk had previously defiantly described the restrictions aimed at slowing the spread of virus as “fascist”, urging governments to ease restrictions. Some Tesla factory workers were apprehensive in returning to work before State and local health agencies had cleared Tesla workplace practices to resume production operations.

News of the latest quarterly delivery performance caused the company’s stock price to surge nearly 44 percent over the last 7 trading days. That lofty valuation places the company has one of the top valued global automakers among automakers with significantly larger global scale. The valuation could further provide a handsome reward for participants in company’s stock incentive plans, Including Musk himself.

The day before the company’s report of Q2 operational performance, CEO Musk sent an email to all employees congratulating them for their “amazing execution” in challenging times. Yet, as Business Network CNBC and The Wall Street Journal had previously reported, the automaker was compelled to reduce compensation for salaried employees and delay giving raises, promotions and bonuses to respective employees until after performance appraisals are completed, which is expected to be completed by the end of this month. While this is somewhat similar to other U.S. and global-based auto manufacturers, Tesla’s now lofty stock price looms as a big shadow.

From our Supply Chain Matters lens, the COVID-19 disruption has indeed tested the boundaries of how companies are being responsive to shareholder performance as well as worker performance.  The latter is in the context of protecting worker and facility safety measures, but also has fostered notions of added one-time compensation for rewarding essential workers for taking on such risks. This is where increasingly, corporate shareholder responsibilities become conflicted with corporate social responsibilities and practices. In the specific case of Tesla, a rather outspoken Founder and CEO has not been shy in bullying tactics regarding government and health authority-imposed lockdowns, calling into particular question the conflict of these two dimensions.

As with all things related to Tesla manufacturing and supply chain operations, optimism in the light of difficult challenges continually reigns and glass is always being shattered in terms of setting expectations. Only this time, the lines related to social responsibility seem very blurred.

Bob Ferrari

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