On April 25, Beijing time, the American “Business Insider” magazine published an article on Wednesday saying that Elon Musk is the source of Tesla's chaos. To save Tesla, he had to leave.
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The following is the full text of the article:
Tesla once again stood on the edge of the cliff.
Even with the price reduction, Tesla's car sales are slowing down and it has to lay off 10% of its employees. From Shanghai, China to San Jose, USA, from factory floors to executive offices, 14,000 people have lost their jobs. Tesla also recalled every Cybertruck sold by the company. The Chinese market is crucial to Tesla's future, but the company's prospects here are grim.
The fault lies with one person
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Tesla's current chaotic state can only be blamed on one person. Only the departure of this person can save Tesla, and he is Musk. Tesla has looked unstoppable over the past few years, but during these heydays, Musk failed to implement any strategy that would insulate the company from a fierce global price war for electric vehicles. The company is burning cash, losing market share, and has more inventory of older models than ever before.
On Tuesday, Tesla released its first-quarter earnings. Even though Wall Street analysts have given the worst expectations, Tesla's financial data is still at a disadvantage across the board. Earnings per share were $0.45, below analysts' expectations of $0.52. As Tesla focuses on artificial intelligence research and capital improvements, its free cash flow fell a staggering 674%. Gross profit fell 18% year-on-year, and gross profit margin dropped from 19.3% to 17.4%. If Tesla were a car, this would be when you start hearing it make unusual noises.
Tesla's problem now isn't how to get through “production hell” or “delivery hell” with new models, as the company has survived both. Hell is at least still a place, the problem with Tesla is that it has no clear direction. It doesn't matter how much cash a company has on hand if it spends money on products that aren't ready for mass production, like self-driving taxis, or on cars that no one wants, like outdated models. Investors want to see a concrete plan to build a new Tesla fleet for a stingier EV market with shrinking demand.
Musk at least seems to understand this. Earlier this month, he denied a Reuters report that the company had scrapped plans to develop a cheaper Model 2. The Model 2 is a $25,000 Tesla car aimed at the general public, which is the car the market wants. However, during the first-quarter earnings call, Musk mentioned only vague plans to speed up the production process. If you're just starting to follow Tesla, that might be enough, but if you've been following Tesla for the past decade, you know that this kind of timeline can't be taken with a grain of salt.
Even Musk's most loyal shareholders, such as Ross Gerber, CEO of investment firm Gerber Kawasaki, are skeptical. In an interview with Bloomberg after Tesla's earnings report on Tuesday, Gober said he “can no longer rely” on Tesla's timeline statement. Musk spent more time on the conference call talking about his distant vision for a fleet of Uber-like self-driving taxis than he did about selling the next car using existing technology.
“I think it will take at least eight to nine years before they can put self-driving taxis into use,” Tu Le, founder of electric vehicle consultancy China Automotive Insights, said in a recent interview. “I think they would argue But I'm pretty optimistic at best.”
However, Musk does not have eight to nine years to save Tesla. On one side of the world, Chinese rivals are able to build cars at much lower costs. On the other side, traditional automakers are relying on sales of their combustion engine and hybrid vehicles to weather slowing demand for electric vehicles. If the Chinese market is a rock, then the Western market is a hard wall, and Tesla is caught in a dilemma between the two.
Tesla needs a serious leader with real ideas, no self-driving gimmicks, no flamethrowers, no broken Cybertrucks, no trolling spam posts, no video game marathons, There is no need to use ketamine indiscriminately.In a word, there is no need for people like Musk. It requires an exceptionally focused and extremely efficient leader who can deliver Model 2 without long delays.
On Tuesday, Musk addressed the recent layoffs. He said Tesla needs to restructure to enter a “new phase of growth.” He's right, Tesla does need a major shakeup, but it has to start with him.
Not doing his job properly
Tesla's future doesn't have to be so ugly. In 2020, Tesla was on top of the world as its Shanghai factory began producing lower-cost, higher-margin cars. The company was building a factory in Germany and one in Texas. It's selling more cars than ever before. Big annual profits have fueled a big rally in the stock market, and Wall Street is cheering.
So, what did Musk do in these glory days? He sold a large chunk of Tesla stock to buy Twitter, tried to back out of the deal, and then was forced to close the deal. He blew up some rockets (to be fair, some of them went into space too). He implanted brain chips into a group of monkeys. He took the kitchen sink to work and added a few more CEO titles. He publicly botched Gov. Ron DeSantis' attempt to launch a presidential campaign. At Tesla, Musk delivered about 4,000 Cybertrucks, each of which was recalled for acceleration problems, squandering the reputation the company had built up with its core customers.
Despite all Tesla has accomplished over the past few years, it's clear that Musk should be spending more time with Tesla. Tesla has failed to develop a strategy for dealing with chaotic times, and the electric vehicle industry is clearly still in its infancy. Of course, the company has been trying to “slim down” and cut costs for years, but that strategy wasn't enough to balance price cuts, weak demand and a lull in new vehicles that required significant capital expenditures to get through this period.
Musk has long claimed to be a truly visionary CEO. But such a CEO should have continued to capitalize on the advantages Tesla had developed in the electric vehicle market. They should do research to understand what demand for electric vehicles will look like after early adopters purchase the cars. They should have known what kind of buyers would be entering the market at this stage and what kind of cars those buyers wanted. A truly visionary CEO meets customers where they need them. In November, Navdeep Sodhi, a pricing analyst at pricing consultancy Sodhi Pricing Associates, said Tesla should advertise to let the public know about the cost advantages of its cars, such as those compared to gas-powered vehicles. Cost advantage. Advertising may also help alleviate concerns about issues such as range anxiety. This month, however, Tesla laid off its entire marketing team.
Analysts have been warning Musk for years that competition is coming, not just from traditional automakers but also from the Chinese market that has fueled Tesla's success. China has always supported Western companies entering the Chinese market to promote competition. Once Chinese competitors can catch up, the balance will tilt in favor of local companies. That, coupled with China dominating nearly every aspect of the battery supply chain, from mining and smelting metals to manufacturing the batteries themselves, helps Chinese EV makers produce vehicles at prices as low as four figures. This puts Tesla at a disadvantage in one of its most important markets: Tesla's share of the Chinese auto market fell from 10.3% at the beginning of 2023 to 6.7% in the fourth quarter.
strategic mistake
To stay ahead, Tesla should have focused on producing the Model 2 and attracting more customers by lowering prices. But Tesla stopped innovating, and the Model 2 never became a reality. By the time Musk realizes the company needs to launch a Tesla for the masses, it may be too late. Instead of boosting sales by launching new models that are stunning or cheap to buy, Tesla is trying to increase sales by occasionally lowering the prices of existing models, thereby boosting demand. However, this did not have the desired effect. According to the financial report released on Tuesday, the revenue of the automotive business fell 13% from the same period last year, and the gross profit margin of the automotive business fell to 14.8% from 18% in the same period last year.
Tesla has always been a “growth” company, an up-and-comer that is challenging traditional automakers. But now, the company has entered a new stage of development. It is a large, mature company and continuing to grow will require more capital, discipline and focus. Musk never catches a break, but after 2020, Tesla started to look less like a place where Musk kept pushing automotive innovation and more like a place where Musk raised money to do the things he wanted to do. Maybe he was bored, maybe he was distracted. Regardless, Musk stopped pushing Tesla’s limits prematurely.
During the first-quarter earnings call, Musk made countless excuses for the poor performance this quarter: the Houthi rebellion in the Red Sea, arson in Berlin, Fremont factory upgrades, etc. He declared,Tesla is not a car company, but an artificial intelligence robotics company.He gushed about turning Tesla into a driverless Uber ride-hailing service, but declined to answer any questions about the Model 2. He talks about this and that, but he doesn’t talk about the next few quarters because he has no plan.
survival problem
Musk's departure could cause Tesla stock to take a short-term hit, as there are still many Musk fans who hold Tesla stock because of their fascination with Musk. But the rest of Wall Street is starting to wake up to Tesla's grim outlook: As of Tuesday, the stock had fallen more than 40% this year and was down more than 60% from its all-time high in November 2021. However, Musk expressed his intention to accelerate the production of Model 2, which promoted the rise of Tesla's stock price.
But for now, shareholders should be more concerned that Musk might be wasting Tesla's resources on side projects, whether it's turning the X into a dating app for libertarians or building another vanity clown car. If Model 2 cannot be launched as soon as possible, Tesla will lose the global electric vehicle war in the foreseeable future. Forget growth, the company that was supposed to be America's EV juggernaut now has survival issues to deal with.
When Musk entered the electric vehicle arena, Tesla was the only player, interest rates were still 0%, and most Americans believed he was Iron Man. Since then, China has become a dominant player in the electric vehicle market, traditional automakers want a piece of the pie, debt has become more expensive, and half of Americans have come to think Musk is Lex Luthor. villain).
Times have changed, and Tesla’s leadership needs to change with it or else it will fall behind.