What’s next for Elon Musk and Tesla?
Three ways entrepreneur can stop the wheels from coming off
Elon Musk is one of the most interesting people alive.
He is the Howard Hughes of our time, a serial entrepreneur, a trailblazer in several of the technologies that will shape this century, a man determined to save humanity from extinction due to climate change, and to make Mars habitable so we have a place to live if the fight against global warming fails.
He is also a mess. Questions about Musk’s mental stability abound, especially on the internet, and Musk himself has tweeted that he might be bipolar.
The public hell that has been Elon Musk’s life in recent months sees him on a trajectory that ends, the way Howard Hughes’ life did, as a hypochondriac recluse with 3-inch-long toenails who once made a difference, but was forgotten before he was gone.
Musk is under tremendous stress. He is CEO of at least three major firms with huge challenges and oversees about half a dozen others, including the whimsically named but dead serious Boring Co., which proposes to build an ultra high-speed underground intercity commuter line near Los Angeles.
At the pioneering electric-car maker Tesla Inc. alone, Musk has a payroll of 37,543 workers to meet. Wall Street is demanding a Tesla turnaround. Production delays with Musk’s bet-thecompany Model 3, its first mass-market vehicle, have cut the firm’s stockmarket value by 23.3 per cent since its June 2017 peak. Musk also has a debilitating obsession with short sellers, investors betting against Tesla stock, whom Musk accuses of trying to destroy Tesla.
An unusually candid Musk began last year to reveal himself in interviews as a prisoner of loneliness, who puts in work weeks ranging up to 120 hours, and risks addiction to the heavy doses of Ambien that give him the few hours of sleep he gets.
This year, Musk has invited ridicule with a quixotic Tesla privatization scheme that he quickly abandoned, which has attracted U.S. government attention for potential legal improprieties.
The image of a Musk in a dopey-eyed haze smoking a joint on a podcast went viral, of course. Musk inexplicably accused a rescue worker in a Thai mining disaster of pedophilia, prompting a defamation lawsuit.
Musk, 47, a South African émigré whose higher education began at Queen’s University in Kingston, Ont., now appears unsuited as CEO of a Palo Alto, Calif.-based Tesla with a sky-high stock-market value of $48.6 billion (U.S.), even after its stock decline.
A distracted Musk failed to quickly establish the Model 3 as the must-have electric vehicle (EV), after forcing the entire global industry to follow his example in developing EVs. The Model 3 must now compete in a market with almost 500 rival EV models, offered by industry giants like Volkswagen AG and boutique makers such as Jaguar Land Rover Automotive PLC.
But Musk still matters. By certain crucial measures, Tesla continues to hold the industry lead in breakthrough technology. Even UBS AG, a longtime bear on Tesla stock, said this week that Tesla still leads the industry in acceleration and range.
Musk’s SpaceX is the first non-government entity to launch cargo-carrying rockets into space and return them safely to Earth – a technology now relied on to resupply the International Space Station and bursting with promise of other applications. And Musk’s SolarCity is a world leader in solar-panel technology.
There are options for restoring Musk’s creative dynamism.
Musk steps away from running Tesla, as another unpredictable founder, Frank Stronach, ultimately did at Magna International Inc., now the world’s second-biggest auto-parts maker, to indulge his passion for horse racing. Musk, with more passions than one can count, would retain his sizable stake in Tesla but devote himself to SpaceX, SolarCity and myriad other ventures not exposed to unforgiving Wall Street scrutiny.
Musk has long resisted recruiting a strong second-incommand at Tesla. With Musk gone, a new Tesla top management team heavily stocked with cost-control and production experts would run a firm now dominated by engineers.
Musk commits solely to Tesla, retaining his chief designer post, as Bill Gates did in transitioning away from Mi- crosoft Corp., but handing off CEO duties to a brilliant autoindustry turnaround CEO. Prime candidates are Carlos Ghosn, who restored health to both Renault S.A. and its affiliate Nissan Motor Co., and Alan Mulally, who revived an ailing Ford Motor Co. In a masterstoke, Musk would earn plaudits for his willingness to demote himself and for restoring investor confidence by recruiting a renowned turnaround CEO convinced of Tesla’s bright prospects.
Musk sells Tesla, using the proceeds from his controlling stake to shore up SolarCity’s strained finances and to fund the almost infinite possibilities at SpaceX.
While they have made inroads on Tesla, none of Tesla’s automaker rivals have a depth of EV wizardry to match a 15-year-old Tesla that has never wavered from its sole commitment to the EVs that are expected to account for one-third of vehicles on the road by 2030.
Vastly improved batteries are key to the practicality and popularity of EVs, and Tesla’s “Gigafactory” battery-works in Nevada is among the industry’s crown jewels. It’s difficult to imagine any of the biggest automakers not willing to pay top price for Tesla.
And a Tesla under the wing of a giant traditional automaker would for the first time in its history have the secure financing to ramp up its R&D pursuits. (Cash-hungry Tesla has never turned a profit.) Also for the first time, Telsa would be able to tap a worldwide distribution network for quickly getting its vehicles to the huge, multinational customer bases of a VW, Toyota Motor Corp., General Motors Co. or the Renault-Nissan-Mitsubishi-AutoVAZ Alliance.
Tesla’s current sales are so reliant on government subsidies to EV buyers that Musk successfully sued Ontario to overturn its recent attempt to cut buyer rebates.
Among EV makers, the single-suited Tesla is the firm most acutely reliant on state rebates for EV buyers. Those subsidies will wind down once they’ve served their purpose of achieving critical mass in EV adoption. Norway, where percapita EV ownership is among the world’s highest, is already scaling back buyer rebates.
Tesla is having a tough enough time now as a standalone company. Retaining that status seems unlikely in a market devoid of government buyer subsidies.
What’s plainly unacceptable is inaction. With or without Musk, his legacy will endure at Tesla and SpaceX. But Musk really does have the rare gift of conceiving breakthrough ideas and making them a reality, unlike a Thomas Edison or Henry Ford whose misplaced acclaim actually owes much to brilliant associates.
The world needs that gift. It needs an end to the current upheaval in Musk’s world. Charles Elson, the veteran of best practices in corporate governance at the University of Delaware, sighs over the “bizarre” reports from that world. “It is,” he says, in admiration of Musk, “a drama we shouldn’t be watching.”