The case for Tesla without Musk
Pop quiz, Tesla fans. Who at the EV automaker made this memorable assessment of the company's latest product: "we have dug our own grave with the Cybertruck"? Was it some cowardly VP who doesn't believe in Dear Leader's glorious vision? Perhaps Drew Baglino or Rohan Patel, two top execs who joined the ten percent of Tesla employees getting pink slips this week?
No, it was Elon Musk himself — making a prediction that, for once, may come true in the near term.
The CEO made his grave comment in an earnings call in October 2023 (see the full transcript here). "In general," Musk added in response to a question about the production woes behind this stainless steel vehicle, "nobody digs a better grave than themselves." It was an odd joke, even by Musk's standards, which may be why he pivoted to repeating how great he thought the $80,000-plus Cybertruck was.
Fast forward to April 2024, and it's looking like less of a joke for Tesla. Every Cybertruck on American roads is now subject to a recall, not to mention major mockery, over a poorly-glued accelerator pedal pad that could could come off and cause the pedal to be jammed against the floor. The firings and the price cuts that followed the recall seemed a desperate Band-Aid on a bigger wound, especially given a sleight-of-hand trick where the company advertised a price that was not the sticker price (because it had estimated gas savings built in).
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The wound is this: With more competitors than ever, Tesla's EV market share has been slipping for years. The much anticipated low-end $25,000 Tesla Model 2 has failed to materialize. A Reuters report citing internal documents suggests it has been killed, though Musk denies this. Musk's two-pronged solution to the slip — Cybertruck and cybertaxis — seems increasingly like whistling past the graveyard. Some of Tesla's biggest boosters are pushing the panic button over the self-driving cybertaxi concept Musk is planning to unveil in August.
And the Tesla board's response to all this? They're pushing for a $50-plus billion stock package payday for Musk, one that a Delaware judge already struck down as "unfathomable." The vote is in June, and major shareholders are already coming out against.
The market is electric
Seen from one angle, Tesla is facing the same headwinds that are hitting all EV manufacturers this year — especially EV truck manufacturers in the U.S., where gas-powered auto sales are annoyingly tenacious. Ford has had to scale back production of the F-150 Lightning. Rivian had a disastrous earnings report that just sent its stock tumbling to a new all-time low. EV sales just declined quarter-on-quarter, the first such decline since 2020.
On the other hand, that's not the whole market picture. People are still buying more EVs than ever, and they still comprise a greater-than-ever share of the U.S. fleet. Comparing Q4 sales (the holiday season) with Q1 sales (when fewer of us buy anything) is rarely a good idea. Year-on-year, Q1 EV sales are still rising, even in the U.S. Growth was so strong during the pandemic, a brief slowdown in growth is to be expected; it doesn't mean the market is maturing. Nor does confusion over which cars qualify for the $7,500 federal tax credit, a list that includes the Tesla Model 3 and Y. Rivian doubled production and deliveries in 2023; its problem is that it is selling those electric trucks at a loss. Tesla isn't.
The fundamentals aren't what is hurting Tesla stock, which just saw a whole year's worth of gains wiped out under this distracted, X-obsessed, conspiracy theorist CEO. Musk doesn't seem to have noticed (but the Wall Street Journal just did) that his far-right lurch is demonstrably turning off the Democratic-voting would-be Tesla customers just when the company needs them. Tesla's earnings call Tuesday looks likely to contain even worse news, with profits off 40% and the first revenue decline in four years expected. Many analysts believe the stock is still overpriced and has much further to fall.
Tesla shareholders could be forgiven for seeing a freshly-dug six-foot hole opening up in front of their investments. The previously unthinkable — that Musk has no real plan, that Tesla might actually make more money in the long run without Musk and his pliant board at the helm — is gaining currency.
"When you’ve been right in the beginning, you think you’re right forever,” entrepreneur and educator Steve Blank told The New York Times. “You run by whim rather than strategy." Since 2018, Blank has been gathering converts to this comparison between Musk and Billy Durant, the erratic entrepreneur who lost control of General Motors (twice!) a century ago. "Durant's one man show was damaging the company," Blank wrote then. "The company had no financial controls other than Durant’s ability to raise more money."
Sound familiar? It's pretty much the same guy we saw in Power Play, a 2021 book on Musk's Tesla by Wall Street Journal tech reporter Tim Higgins, which still counts as the most unvarnished portrayal to hit bookshelves. "While Musk's vision, enthusiasm and determination carry Tesla," Higgins wrote, "his ego, paranoia and pettiness threaten to undo it all."
As does his insistence on a stainless-steel truck that looks, in the words of one car designer, like a "low-polygon joke."
(Don't) Keep on Truckin'
The Cybertruck wouldn't be such a problem for Tesla if it was just the CEO's vanity project. But the R&D costs are likely to be extraordinary, experts say — enough to require 300,000 sales a year just to break even. That "inherently high-cost product" presents a "tough challenge," analyst Ed Kim of market research firm AutoPacific told Wired last year. "Vehicles that sell in volume tend to be much more palatable to mainstream tastes." The mere 3,800 Cybertruck sales so far, or less than 1,000 a month, would seem to bear that out.
But it's not as if Musk is the kind of guy who can backtrack when he has a bad idea. By all accounts, Tesla's gigafactories have been doubling down on Cybertruck production, all to meet the demand that the CEO insists is there. Musk has been firing off screed-filled emails about getting his Blade Runner-inspired vehicle machined with incredible accuracy down to the micron level, because soda cans and Lego bricks are made that way. (Of course, they're made out of aluminum and plastic, respectively, not the notoriously difficult stainless steel.)
So it is no exaggeration to say that Cybertruck sales are the battleground on which Tesla's entire future is being fought. And to quote the frustrated Musk seen in Power Play, "sales suck donkey dick." More than a million people paid a $100 deposit to get in line for a Cybertruck, but they're not converting into buyers yet. There are viral TikToks of Cybertrucks getting stuck in snow, of its windshield getting smashed by hail, of its software simply shutting down. Experts' concerns about the design and its safety in crash tests have gone unanswered.
Good news, though: the report from one owner that taking it through a car wash turns the car into a software-less brick has not been replicated. Meanwhile, yes, there are spots that look like rust (actually iron deposits in debris picked up when you drive), but Tesla is at pains to point out that you can just get rid of them with isopropyl alcohol. So, just carry a few bottles of that while you drive around, buff it up every time you stop, and you're good to go in your blindingly shiny steel ride.
Are there enough Blade Runner-loving Musk fans in the world to help Tesla turn a profit on the Cybertruck yet? Perhaps. Then again, if the idea of an electric-powered massive hunk of metal with questionable environmental value was appealing, the Hummer EV wouldn't have been one of the worse-selling cars of last year.
More importantly, are there enough Tesla shareholders not blinded by Musk's one-man show? Can they, or anyone else, shock the EV maker's board out of its complacency? If not, then Tesla may have made itself many thousands of large, angular, steel headstones for its corporate grave.
This column reflects the opinion of the author.