Is Elon Musk at the wheel of Tesla?
Investors were left scratching their heads on April 2, as Tech titan Tesla released its first-quarter production update. Deliveries dropped a staggering 9% year-over-year, reaching a low not seen since the onset of the Ukraine conflict. With fingers pointing squarely at Tesla's CEO, Elon Musk, many suspect his political leanings may have played a part.
Musk has been a breath of fresh air in the business world, delivering exceptional results despite his eccentricities and controversial personality. Yet, this time, the results bucked that trend. Critics argue that Musk's vocal backing of former US president Donald Trump and stiff competition from Chinese EV maker BYD have hovered a dark cloud over the brand.
BYD, seeing significant success in the EV market, surpassed Tesla in 2024 to become the world's largest EV producer, exerting pressure on Tesla's margins with its competitive pricing. One long-standing Tesla investor, Ross Gerber, bluntly attributes Tesla's woes to Musk, stating, "Tesla has two main issues. And they're both created by Elon." These issues range from the polarizing impact of Musk's political views on potential customers, to doubts surrounding the success of its much-hyped robotaxi launch.
Musk defended himself, stating that Tesla revamped its production line during the first quarter and hit output for its popular Model Y. However, subsequent European sales data suggested that the slump was more than a one-off. Apparently, large swaths of Tesla's market have been alienated by Musk's alliance with Trump. Daniel Ives, head of technology research at Wedbush Securities, echoed these sentiments in a May research note, stating "the story of Musk's role in the Trump administration caused significant brand damage for Tesla."
Despite these challenges, Musk remains focused on revolutionizing the EV industry with his long-awaited robotaxi launch. The fate of Tesla may hinge on this launch, as around 75% of its $1 trillion market capitalization is predicated on its dominance in the self-driving car revolution.
Brett Winton, chief futurist at ARK Invest, shared Musk's optimism, stating that the robotaxi launch will transform Tesla's business model. "[It will go] from a one-time sale of the vehicle at low margin to generating ongoing revenue off every vehicle in the fleet over time," Winton explained. Musk reaffirmed his commitment to this launch, stating on Tesla's first-quarter earnings call that it was imminent. However, his attention seemed to wander, as his other major announcement focused on stepping back from his role in the Trump administration, amidst growing controversy.
Aside from Tesla, Musk's other ventures keep him more than busy. There's his recent acquisition of Twitter, his foray into creating an OpenAI competitor, and his work on Neuralink, a futuristic brain-computer interface technology. Above all, SpaceX continues to dominate his attention.
SpaceX secured a dominant position in the booming space industry by providing internet service via Starlink, and has become a formidable force in the satellite business. However, the last three Starship test launches ended in failure, casting a shadow over Musk's ambitious plans to colonize Mars. Despite these setbacks, Musk remains undaunted, laying out his vision for hundreds of manned missions to Mars by 2033.
With so many ambitious projects on his plate, investors have expressed concern about Musk's focus on Tesla. In particular, pension funds have urged Tesla's board to compel Musk to work a standard 40-hour week. Such demands come alongside rumors that Tesla had engaged a headhunting firm to find a new CEO, a move that both Musk and the board have vehemently denied.
Amidst these controversies, there have even been whispers about Musk being replaced as CEO. While such a scenario seems unlikely, rumors continue to swirl about Tesla's board contemplating the unthinkable. One analyst, Gerber Kawasaki's Ross Gerber, even suggested that Tesla chair Robyn Denholm might be the more likely to leave the company, potentially paving the way for Musk to reinstate himself as CEO and run Tesla as he sees fit.
Despite these controversies, Musk's contributions to Tesla's success cannot be denied. From single-handedly keeping the company afloat during its darkest days, to generating funding and cultivating a dynamic team, Musk remains a driving force behind Tesla's meteoric rise.
Investors are left to weigh the risks and rewards of investing in Musk and his various ventures. With its astronomical valuation, Tesla undoubtedly carries significant risk. However, if Tesla manages to crack the self-driving car revolution, as Musk insists it will, its market cap could double to over $2 trillion by 2026, according to Wedbush Securities' Daniel Ives. Investment trusts like Scottish Mortgage provide a safe avenue for investors to gain exposure to Tesla and SpaceX, while ETFs like ARK's Innovation Fund offer an opportunity to boost Tesla exposure.
Regardless of the controversies, one thing is certain - Elon Musk remains a force to be reckoned with in the world of technology and entrepreneurship. For better or worse, his influence continues to shape the course of the EV and space industries.
- Tesla's first-quarter production update, which showed a 9% year-over-year drop, has sparked concerns among investors about Elon Musk's role in the company, as many blame him for the brand's woes, citing his controversial political views and the competitive threat from Chinese EV maker BYD.
- Amidst Tesla's struggles, Elon Musk continues to explore other ventures, including his recent acquisition of Twitter, his work on Neuralink, a futuristic brain-computer interface technology, and his plans for SpaceX to colonize Mars.
- In light of Elon Musk's extensive commitments and the controversies surrounding Tesla, some investors are turning to investment trusts, such as Scottish Mortgage, and ETFs, like ARK's Innovation Fund, to gain exposure to Tesla and SpaceX, balancing the significant risks associated with these ventures.
