Tesla may have been the victim of internal employee sabotage, Elon Musk suggested in emails published this week. The CEO claims that an employee passed over for promotion conducted “extensive and damaging” actions to internal operations.
The scandal comes at a particularly tense time for Tesla, which is working to produce the Tesla Model 3 at high capacity. Musk has thrown down the gauntlet to short sellers, investors who stand to make a gain if the company’s stock price drops, by claiming that their position will “explode” over the next three weeks.
What Do The Emails Say?
In an email to employees on Monday, shared by CNBC, Musk said:
I was dismayed to learn this weekend about a Tesla employee who had conducted quite extensive and damaging sabotage to our operations. This included making direct code changes to the Tesla Manufacturing Operating System under false usernames and exporting large amounts of highly sensitive Tesla data to unknown third parties.
Musk claims that the employee in question stated that he wanted a promotion that he did not receive. The full extent of the employee’s actions “are not yet clear,” but Musk noted that “not promoting him was definitely the right move.” The company plans to continue its in-depth investigation this week to deduce whether he was working alone or with someone else.
The email went on to explain that a lot of people want Tesla to fail, including oil and gas companies, Wall Street short-sellers, and gas and diesel car company competitors. Musk alluded to the Volkswagen emissions scandal with the latter group by stating “if they’re willing to cheat so much about emissions, maybe they’re willing to cheat in other ways?”
The message continues by asking employees to remain extra vigilant over the coming weeks, reporting anything suspicious to an included email address.
In a follow-up email shared by Electrek, Musk suggested he may have just been paranoid:
Late last night we had another strange incident that was hard to explain. Small fire on the body-in-white production line. No one was in the area and there were no injuries or significant equipment damage, but it was enough to stop the body production line for several hours.
It could be just a random event, but as Andy Grove said, “Only the paranoid survive.” Please be on alert for anything that’s not in the best interests of our company. If you aren’t getting a response from the REDACTED email please send me a note directly.
Why Does This Matter?
The issue comes as Tesla is undergoing one of the biggest expansions in its history. The Tesla Model 3 launched in July 2017, but the company has grappled with hundreds of thousands of $1,000 reservations for the $35,000 car in the face of gradual boosts to its manufacturing capabilities.
Model 3 production as shown at the Model 3 handover.
Tesla was originally set to produce 20,000 cars per month in December 2017, but ultimately produced around 2,500 in the entire quarter. It’s gradually increased its production to reach 500 cars per day at the start of the month, with the aim of reaching 5,000 per week by the end of June. Tesla has built a tent at its Fremont plant to expand the production line just to meet this goal.
Failure to expand fast enough could leave the company in financial difficulty. Goldman Sachs predicted in April that the company would only reach a rate of 1,400 cars per week that month, necessitating a return to the markets to raise capital. Musk poked fun at these reports with a bankruptcy April Fools Day gag.
What Happens Now?
Tesla is set to report its quarterly production figures in three weeks’ time, where it will be revealed whether the firm has met its targets.
As for the employee, it’s unclear what will happen at the end of the investigation:
The pressure is on for Musk to meet his goals.
