Elon Musk’s distraction is just one of Tesla’s problems

Production headaches on three continents. Intensification of competition. A plummeting stock price. And an absent-minded chief executive seemingly determined to alienate some of the company’s most loyal customers.

A growing list of problems at Tesla, the world’s most valuable automaker, is piercing its mystique as the segment’s technology leader, leading analysts and investors to question whether it can continue to dominate the electric vehicle market.

At the center of investors’ concerns is Elon Musk, the chief executive, whose high-profile purchase of Twitter eclipsed his role in Tesla at a critical time in the automaker’s relatively short history.

Tesla is working to ramp up production at new factories in Austin, Texas, and outside of Berlin. Covid restrictions and dysfunctional supply chains, a problem for all automakers, have led to intermittent shutdowns at Tesla’s Shanghai factory.

As interest rates rise and a global recession looms, demand for Tesla vehicles appears to be slowing. Just a few months ago, potential buyers had to wait months for a new Tesla. Now cars are available within days, which analysts say is a sign of weaker demand.

Still, Mr Musk is concerned about Twitter, a company he admits buying at an inflated price. Last weekend, he asked users of the service in a “poll” whether he should step down as Twitter’s chief executive, saying he would respect the results. A majority of those who responded said yes.

On Tuesday, Mr. Musk said he would step down as Twitter’s chief executive “as soon as I find someone dumb enough to take the job!” But he also said he would continue to manage the software and server team.

Managing Tesla “is not a part-time job in these volatile and challenging times,” said Axel Schmidt, senior managing director at Accenture who oversees the consulting firm’s automotive division.

Tesla did not respond to a request for comment.

Mr Musk remains widely admired in the auto industry for the way he proved battery-powered vehicles could be stylish, fun to drive and cost-effective. Tesla’s success has forced auto giants like General Motors, Ford Motor and Daimler to respond with their own electric models.

Mr. Musk personifies Tesla as much as Henry Ford once personified the automaker that bears his name. As co-founder, CEO and largest shareholder, Mr. Musk is able to make decisions quickly and has gained a big lead over traditional automakers in battery technology and software.

But it’s unclear who’s tending the store while Mr Musk tries to remake Twitter. Tesla does not publish any management pyramids. The company’s website lists only three senior executives: Mr. Musk; Zachary Kirkhorn, Chief Financial Officer; and Andrew Baglino, senior vice president responsible for engineering.

Mr. Musk “has such a big personality, it feels like the business is weak without him and nothing happens without his approval,” said Garrett Nelson, senior equity research analyst at CFRA, a firm investment research. (Mr. Nelson added that he disagreed with this view.)

And now that traditional automakers are selling credible EVs, Tesla no longer has the market all to itself.

In the United States, electric vehicles from Ford, General Motors and Hyundai have eaten away at Tesla’s lead. Competition will intensify this year with the introduction of models like the Cadillac Lyriq and Nissan Ariya.

In China, Tesla faces a tough challenge from local manufacturers like BYD, which this year stopped making internal combustion models to focus solely on electric vehicles and overtook Tesla in the number of cars sold.

In Europe, Volkswagen and its subsidiaries like Audi already sell more electric cars than Tesla, although Tesla’s Model Y and Model 3 remain the most popular all-electric vehicle models.

In an industry that thrives on new products, Tesla hasn’t introduced a new passenger car since the Model Y, a sport utility vehicle, in 2020. The company has promised to start selling its long-awaited Cybertruck in 2023. But the pickup will arrive long after competing products from Ford, Rivian and General Motors.

Tesla’s stock price, down 66% at the end of Wednesday’s session from its November 2021 high, illustrates how quickly investors have lost confidence in the company and Mr. Musk. On Tuesday alone, the stock fell 8%.

The decline partly reflects concerns that Mr. Musk will have to sell more shares of his Tesla stake to pay for his takeover of Twitter. To fund his purchase of the social media site in October for $44 billion, Mr Musk sold $23 billion worth of Tesla stock, flooding the market and driving the price down. He remains Tesla’s largest shareholder.

The stock plunge is also a sign that investors no longer believe Mr Musk’s promises that Tesla will sell 20 million cars a year by 2030, as much as Volkswagen and Toyota combined. It was this dream of world domination that justified Tesla’s $1 trillion valuation. (These days, Tesla is worth less than half.) Mr. Musk suggested on Twitter on Tuesday that stocks had fallen due to rising interest rates and the threat of a recession.

Mr. Musk has always been a mercurial boss, but his management style has been on full display since he bought Twitter, where he fired or fired more than half the staff and demanded that those who remained work hours” hardcore”.

The chaos on Twitter has eroded Mr. Musk’s reputation as a genius, and his inflammatory tweets risk alienating potential buyers, who lean to the left. He suggested that Dr. Anthony Fauci, the nation’s chief immunologist, be prosecuted and accused Senator Elizabeth Warren, Democrat of Massachusetts, of hurting America after he said he was neglecting his duty to stockholders. You’re here.

“There was this kind of aura around Elon Musk that he couldn’t hurt,” said Taylor Ogan, a hedge fund manager and YouTube presence who has owned three Teslas. “It finally caught up with him.”

Joya Banerjee, senior gender-based violence adviser at the humanitarian organization CARE in Washington, looked at a Tesla as she bought an electric vehicle last year. But even before Mr. Musk bought Twitter, she was put off by what she perceived to be his ego, sexism and excessive power.

“I couldn’t see my money going into his CEO salary,” she said. Ms. Banerjee bought a Ford Mustang Mach-E instead.

Kenneth Holecko, a retired government human relations official who lives in Virginia and owns a Tesla, said Mr. Musk’s statements about Dr. Fauci and other matters added to concerns he had about credibility. of the company on issues such as the safety of its self-driving software.

“I’m not going to go out and sell my Tesla because of what’s going on with Twitter,” Mr. Holecko said, “but I would never buy another Tesla.”

Survey data indicates that Mr. Musk’s behavior has hurt the Tesla brand among liberals, the group most likely to buy electric cars. Tesla’s net preference rating – the number of people who view the company positively minus those who hold a negative opinion – fell to 10 percentage points in November from 31 percentage points at the start of the year, according to Morning Consult, a research firm.

Tesla’s net preference rating among Republicans improved slightly, from 21 percentage points in August to 27 percentage points in November, as Mr. Musk embraced some conservative talking points, research shows. company. But it’s unlikely there will be enough new Republican Tesla fans to offset disgruntled Democrats, said Morning Consult analyst Jordan Marlatt.

“More and more, Tesla is becoming quite a partisan brand, and that could have some pretty serious implications for Tesla in the future,” Marlatt said.

Although Tesla still dominates electric vehicle sales in Germany, it regularly gives ground to other manufacturers. Mr. Musk’s recent activities on Twitter have made headlines across the country, along with Germany The Ministry of Foreign Affairs joins the European Union in condemning the deactivation of certain journalist accounts on Twitter as dangerous for the freedom of the press.

The bitter mood surrounding Mr Musk is starting to rub off on German drivers, with a clear majority saying his Twitter takeover has had a negative effect on Tesla’s image, especially among women and 50-year-olds or more. Nearly half of Germans who are considering or actively looking to buy a new car said the Twitter takeover deterred them from considering a Tesla, according to Puls, a market research firm in Nuremberg, Germany. The company surveyed 1,010 people in the first weeks of December.

Tesla’s new factory outside Berlin produced 3,000 Model Ys last week, the company announced on Twitter on Monday. But this is well below the targets set by Mr. Musk.

Mr. Musk’s behavior as the head of Twitter has not been an issue in China, by far the biggest market for electric vehicles. Like almost all Western social media platforms, Twitter is blocked in China.

On the contrary, from the perspective of China and the Communist Party, Mr. Musk has been a model foreign leader. In October, Mr Musk received praise from Chinese officials after he suggested Taiwan become a special administrative zone of China to cede more control to Beijing. The comment drew a strong rebuke from Taipei.

But there are signs that stiff competition in China’s electric vehicle market could take its toll. In October, Tesla cut prices for its cars in China by up to 9%. The company said it was doing this because production costs had come down.

Tesla’s sales in China through November were 59% higher than a year earlier, according to data from the China Passenger Car Association, but that was slower than the overall growth of “vehicles new energy” – a category that includes all-electric cars and plug-in hybrids. Sales of these vehicles doubled, while BYD, the market leader, more than tripled its sales.

Tesla has been slower than its Chinese rivals to roll out new models and features. Tesla introduced the Model 3 in China nearly three years ago and the Model Y about 18 months ago. In China, this lag between new models is an eternity and an opportunity for rivals.

“The target has always been on Tesla’s back, but now it’s bigger because it looks weaker,” said Tu Le, managing director of Beijing-based consultancy Sino Auto Insights. “Competitors smell of blood.”

ryan mac contributed report.