Is Musk’s vision turning into a mirage?
Tesla founder was supposed to be a visionary because he spoke in visions, for which there will always be a large receptive audience
He is prone to Twitter eruptions. He scolds the news media for its purported dishonesty and threatens to create a Soviet-like apparatus to keep tabs on it. He suckers people to fork over cash in exchange for promises he hasn’t kept. He’s a billionaire whose business flirts with bankruptcy. He’s sold himself as an establishment-crushing iconoclast when he’s really not so. His legions of devotees are fanatics. I speak of Tesla chief executive Elon Musk.
Not long ago, a wise friend with an enviable Wall Street reputation wrote me to describe his astonishment with Tesla, calling it “a situation unlike anything I have ever seen”.
“The stock market valuation of a well-known company is stratospheric,” he said, “while at the same its bonds are viewed as junk”. “Meanwhile”, he added, Musk “plays to his audience with constant tweets of claims that go largely, repeatedly and visibly unfulfilled. And the SEC, which is supposed to prevent companies like this that raise money from the public on false pretences, sits idly by”.
Strong words — too strong, if you ask the satisfied customers of Tesla’s Model S (base price, $74,500) and X ($79,500). But Tesla is supposed to be the auto manufacturer of the future, not a baublemaker for the rich. The company has rarely turned a profit in its nearly 15-year existence. Senior executives are fleeing like it’s an exploding Pinto, and the company is in an ugly fight with the US National Transportation Safety Board. It burns through cash at a rate of $7,430 a minute, according to Bloomberg. It has failed to meet production targets for its $35,000 Model 3, for which more than 400,000 people have put down $1,000 deposits, and on which the company’s fortunes largely rest. Also, the car is a lemon. Like the old borscht belt joke, the food is lousy and the portions are so small.
So much, then, for Elon Musk solving climate change or everything else he has promised to do, such as building cities on Mars or (much more preposterously) solving LA traffic. At this point, it would be enough for Musk to save his company and the jobs of its 37,000 or so employees. For them and their families, saving the world first requires that Musk turn a profit on his existing business, not spin tales about his future ones. I’ll leave it to market analysts to figure out whether that can happen (some actually think it can), though the solution will not come from finding the next John Sculley to discipline Musk’s Steve Jobs. The Apple of the 1980s was a brilliant idea with a terrible leader.
Oz without the Wizard
Tesla, by contrast, today is a terrible idea with a brilliant leader. The terrible idea is that electric cars are the wave of the future, at least for the mass market. Petrol has advantages in energy density, cost, infrastructure and transportability that electricity doesn’t and won’t for decades. The brilliance is Musk’s ability to get people to believe in him and his promises. Tesla without Musk would be Oz without the Wizard.
Much of the blame for the Tesla fiasco goes to government, which, in the name of green virtue, decided to subsidise the hobbies of millionaires to the tune of a $7,500 federal tax credit per car sold, along with additional state-based rebates. Would Tesla be a viable company without the subsidies? Doubtful. When Hong Kong got rid of subsidies last year, Tesla sales fell from 2,939 — to zero. But the Tesla story isn’t just about the perils of misdirected government-led development and clever rent-seeking entrepreneurs. And it isn’t about the virtue signalling of those who like their environmentalist bona fides to come with vegan-friendly upholstery. It’s about hubris and credulity — the hubris of the few to pretend they know the future and the credulity of the many to follow them there.
Electric vehicles were supposed to be the car of the future because we were running out of oil — until we weren’t. And Musk was supposed to be a visionary because he spoke in visions, for which there will always be a large receptive audience. Casting about for a cause and a saviour to believe in is what too many Americans do these days, perhaps as a result of casting off the causes and saviours we used to believe in.
US President Donald Trump long ago believed in a cynical kind of wisdom and he rode all the way to the White House and whose consequences we face now. With Musk the consequences are hardly as serious, but the essential pattern is the same. Maybe he’ll next try to sell us on a time machine and promise rides to anyone willing to make a $10,000 deposit. Tesla could surely use the cash.
■ Bret L. Stephens is a senior Op-Ed columnist.