Decline and fall: Tesla under Musk
In the late 2010s, Tesla seemed unstoppable. With soaring stock prices, revolutionary electric vehicles, and a celebrity CEO in Elon Musk, the company was widely perceived as the future of the automotive industry.
Tesla’s mission to accelerate the world’s transition to sustainable energy captured the public imagination, and its market valuation dwarfed that of legacy automakers.
Musk, often compared to Howard Hughes for his visionary reputation and mercurial personality, was named Time’s Person of the Year and even hosted Saturday Night Live. Tesla was a cultural phenomenon.
But by 2024, the Tesla story has changed dramatically.
The company faces slowing sales, growing stockpiles of unsold vehicles, and a crisis of confidence in Musk’s leadership. Tesla’s stock has fallen over 40% since the start of the year as Musk’s erratic behaviour and political controversies alienate customers. Critical projects like the Cybertruck have stumbled out of the gate. Musk seems increasingly distracted by his acquisition of Twitter, now known as X. The perennial question is being asked with new urgency: Is Elon Musk still the right person to lead Tesla?
The most visible sign of Tesla’s troubles is the growing inventory of unsold vehicles. In the last quarter, Tesla produced 433,371 vehicles but delivered only 386,810, its most significant production-delivery gap to date. That surplus of nearly 50,000 cars is no rounding error. Satellite imagery shows vast parking lots full of unsold Teslas, from the Gigafactory in Austin to the Chesterfield Mall in St. Louis. Analysts say it’s the strongest evidence yet that demand for Tesla’s ageing model lineup is softening as new competitors enter the EV market.
The inventory pileup contributed to a stunning $2.5 billion negative free cash flow last quarter, shocking even longtime Tesla sceptics. Tesla says it expects to reverse that trend next quarter, but its track record of missed projections has eroded trust on Wall Street. Tesla’s market share and stock price decline suggest a company whose best days may be behind it, not ahead.
Musk’s controversial compensation package hasn’t helped matters. His 2018 CEO Performance Award, theoretically worth up to $56 billion, was challenged in court by shareholders who called it excessive and unjustified. While a Delaware judge initially invalidated the package, Tesla’s board won shareholder re-approval in a contentious June vote that pitted institutional investors against Musk’s army of retail fans. Critics saw it as another sign of weak corporate governance and Musk’s outsized influence over the company.
But as influential as he may be when it comes to his shareholders, Musk’s sway over public opinion has been waning for years. His political turn toward conspiracy theories, debunked nonsense, vaccine scepticism, anti-semitism, xenophobia, transphobia, and a near obsessive, teenage boy-level promotion of 4-chan grade right-wing views on X have alienated the largely progressive customer base that made Tesla an aspirational brand. Surveys show a sharp decline in Musk’s favorability ratings and Tesla’s brand reputation over the last year, especially among liberal and environmentally conscious consumers. In response, Musk has doubled down, using his social media megaphone to attack the “woke mind virus” and goad his detractors.
Musk’s insistence that Tesla is becoming an artificial intelligence and robotics company, not just a carmaker, has perplexed many observers.
While autonomous driving and robots could (🤷♀️) be part of Tesla’s long-term future, in the near term, it needs to do one thing well: make desirable electric cars.
Reports that Musk diverted high-end GPUs destined for Tesla’s Autopilot program to his X AI project only reinforced the perception that Musk is chasing shiny objects while Tesla’s core business declines.
Indeed, there are growing questions about whether Musk is still focused on Tesla at all. His acquisition of Twitter for $44 billion, an astronomical sum for a company with perennially shaky finances, now looks like a catastrophic mistake. As the owner of X, Musk has generated an endless stream of controversial headlines, from his feuds with journalists to his amplification of far-right conspiracy theories. Tesla shareholders can only watch in dismay as Musk spends his days posting memes and getting into flame wars on his vanity platform.
Meanwhile, Tesla’s much-hyped Cybertruck, which has been in production limbo for years, is stumbling out of the gate. Recalls over faulty accelerator pedals and reports of poor build quality have marred the launch of Tesla’s first pickup truck, pitched as a critical product for cracking the Detroit automakers’ stronghold on the lucrative truck market. What was supposed to be Tesla’s next big thing now looks like another overhyped vanity project with more sizzle than substance.
All of these problems come back to Musk himself. His leadership and singular ability to generate hype made Tesla what it is. But those same qualities, unchecked, now threaten to undo it all. Musk’s ego, his penchant for overpromising, picking needless fights, and chasing his techno-utopian whims have become Tesla’s biggest liability, obscuring the hard work of the engineers and workers who make the company run.
Tesla insists that the “media narrative” (that tricky thing we call the truth) is overblown and that it remains on track to achieve Musk’s “Master Plan.”
But tellingly, Musk did not deliver that master plan update to shareholders as scheduled this month, yet another example of Tesla’s CEO not keeping his word.
As Tesla’s first-mover advantage fades and new EV competitors steal its thunder, it’s increasingly clear that the company needs to evolve. It can’t rely forever on its early adopters and Musk’s cult of personality to drive growth. The focus needs to shift to the blocking and tackling of efficient manufacturing, build quality, and customer support, not moonshot robotaxis and AI pipe dreams. Retail investors may still venerate Musk, but the institutional shareholders who control Tesla’s fate will not tolerate his antics forever.
Musk, Tesla’s animating force, is not willing or able to lead any evolution. Unless something changes, he and his enablers will keep running Tesla into the ground.
Musk has always been a loose cannon, as likely to shoot himself in the foot as to hit a target. His polarizing political forays, half-baked strategic pivots, and acquisition of a money-losing social media platform have squandered immense financial and reputational capital that Tesla cannot afford to waste.
Musk cannot restrain his worst impulses, and he has shown little interest in focusing on Tesla’s core challenges. For all his bravado, Musk is not larger than the forces of economic gravity. No stock can outpace its fundamentals forever, no matter how much its CEO tweets. And Tesla’s fundamentals, from demand to profitability to public sentiment, are all headed in the wrong direction.
Tesla’s rise is one of the great business narratives of the 21st century. But it’s no longer an open question whether its founder is a victim of his hubris, laid low by his inability to get out of his own way.
At least Howard Hughes fucked off and became a recluse; Tesla should be so lucky.
