After the death of Apple’s Steve Jobs in 2011, Tesla’s Elon Musk has been America’s poster boy. In a short period of 15 years since it was founded, Tesla Inc, earlier Tesla Motors, revolutionised the passenger car industry by making electric cars a genuine alternative to the fossil fuel-guzzlers. Elon Musk, Tesla’s feisty CEO, was the front face of the revolution, raising investments and even arranging bailouts from competitors Daimler AG and Toyota. His first car ‘Model S’ with sales of over 200,000 units by 2017, became the largest-selling plug-in electric car in the world.
Tesla has never made an annual operating profit. Yet the corporate world loved Tesla and Musk as they represented the future.
Elon Musk’s personal equity has been high because of his fanatical obsession with out-of-the-box growth. He was one of the early start-ups making $22 million selling his first software venture Zip2; and then cashing out with $180 million in 2002 for the very successful payment company he helped found, PayPal. Much of this money formed the seed capital of Tesla and his aerospace company SpaceX. Today he is worth over $20 billion.
Elon Musk caught world’s attention not just for his successful entrepreneurship. He was the ‘ideas man’ all fired up to use engineering and clean energy to transform the world from impending doom. He wants to build rockets and colonise Mars.
He has plans afoot to reach the Moon by 2022 with a paying passenger, Japanese billionaire Yusaku Maezawa. He has constructed models of ‘Hyperloops’ — tubes through which trains can travel at 700mph on a cushion of air, as well as plans to build a web of tunnels under cities to relieve congestion.
BAD TIMES
But in recent times, things have not been going right. In the latest of developments, the US’ Department of Justice (DoJ) has ordered a fraud investigation, after it was found that Elon Musk could not go through with his announcement that he was contemplating taking Tesla private and had “funding secured” for the deal.
This comes in the general backdrop of not being able to meet delivery targets of its famed luxury ‘Model 3’. Analysts said the company annual target of 100,000 vehicles could not be met, and customers, tired of over four-month waits, were cancelling bookings in droves. These analysts also questioned the company’s ability to sustain losses and its ongoing cash burn. For the second quarter for instance, Tesla on revenue of $4 billion posted a loss of $520 million and burned through cash of $430 million.
Putting Tesla’s predicament in perspective, ‘Business Insider’ says: “Tesla level of spending isn’t unusual for a car company. What is unusual is Tesla’s level of spending for a carmaker that only sold 100,000 vehicles in 2017 and only brought in about $3.3 billion revenue. General Motors spent close to $8.5 billion 2017, but it converted that spending into roughly $150 billion in revenue and a profit of nearly $13 billion.”
ARROGANT STYLE
Elon Musk’s style has also come to bedevil him. A few months ago, he created a sensation smoking a marijuana joint while recording a podcast. While Musk was talking to reaching the moon, back on Earth, a Thai rescue diver involved in getting a team of boys stuck in a flooded cave has sued the Tesla boss for calling him a ‘paedophile’.
Earlier in the year, he forced a showdown with bank analysts, when he snapped at them during an investor call with, “Boring bonehead questions are not cool.” He apologised, but there are an increasing number who feel Musk is losing it. It reflected in loss of confidence among his senior colleagues. Dave Morton, Tesla’s chief accounting officer, has quit citing discomfort with the level of public attention and the pace of work.
When things are on the roll, people give a long rope to quirky traits, even treat it as part of the celebrity package. But, on the down, the same outbursts are punished unforgivingly. Musk is on that second lap now.
Like Travis Kalanick, who had to resign as CEO of Uber mid of last year, Elon Musk has overreached himself. It is the same disease of thinking self and company interchangeably. Instead of burning dollars and mind space on reaching Mars, Musk should be putting his head down to get Tesla to deliver. Unlike Kalanick, it is yet not too late. All he has to do is to put on the brakes and make the business work.