Understanding the chaos at Tesla

This episode delves into the current state of Tesla, focusing on its struggles and strategic shifts amid significant market and internal challenges.

1. Tesla is experiencing significant internal and market challenges, including layoffs and executive departures.
2. Despite aspirations to be seen as a tech company, Tesla's core as a car manufacturer is evident through its struggles.
3. The company faces increasing competition from Chinese electric vehicle manufacturers like BYD, affecting its market position.
4. Regulatory challenges and public safety concerns with Tesla’s autopilot and self-driving features are growing.
5. Tesla’s identity and valuation conflicts are compounded by Elon Musk's public statements and strategic decisions.

1: Introduction

Neil Patel introduces the episode's focus on Tesla's ongoing issues, outlining recent events that have raised concerns about the company's stability and direction. Neil Patel: "Tesla's been on a real roller coaster."

2: Financial Struggles and Layoffs

Discussion on Tesla's financial health and the impact of recent layoffs on the company's operations. Neil Patel: "Earlier in April, Tesla announced it was laying off over 14,000 people."

3: Tesla’s Market Challenges

Exploration of Tesla’s challenges in the electric vehicle market, including competition and consumer reception to new technologies. Andy Hawkins: "Tesla issued a recall for all of its vehicles, recall just being a software update."

4: Strategic Shifts at Tesla

Analysis of Tesla’s strategic shifts, including focus on autonomy and its implications for the future. Neil Patel: "Elon Musk out there saying he's going all in on autonomy."

5: Regulatory and Safety Issues

Overview of regulatory challenges and safety issues with Tesla's technology, impacting consumer trust and company reputation. Neil Patel: "The National Highway Traffic Safety Administration, released a report linking Tesla's autopilot to hundreds of crashes."

1. Research Before Investing: Potential Tesla investors should thoroughly research the company's current market position and challenges.
2. Consumer Caution: Consumers considering Tesla products should stay informed about safety and reliability updates.
3. Market Analysis: Automotive industry analysts should closely monitor Tesla's responses to competition and regulatory pressures.
4. Technology Evaluation: Technology enthusiasts and professionals should assess the feasibility and safety of Tesla's autopilot and self-driving features.
5. Sustainable Choices: Environmental advocates should evaluate the impact of Tesla's operations and technology on sustainability goals.

Today, Verge transportation editor Andy Hawkins and I are going to try and figure out Tesla. I said try — I did not say succeed. But we’re going to try. That’s because Tesla has been on a real rollercoaster these past two weeks, in terms of its stock price, its basic financials, and well, its vibes.

If you’ve been following the company, you know that that gap between what the business is and how its valued has been getting bigger and bigger for years now – and lately, with Elon Musk saying he’s going all-in on autonomy and announcing a robotaxi event in August, it seems like we’re getting closer to a make or break moment, especially as competition in the broader EV market heats up.

People

Elon Musk, Andy Hawkins, Neil Patel

Companies

Tesla, BYD, National Highway Traffic Safety Administration

Books

None

Guest Name(s):

Andy Hawkins

Content Warnings:

None

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Neil Patel

Hello, and welcome to Decoder. I'm Neil Patel, editor in chief of the Verge, and Decoder is my show about big ideas and other problems. Today, Verge transportation editor Andy Hawkins and I are going to try and figure out Tesla. Now. I said try.

I did not say succeed, but we're going to try. Tesla's been on a real roller coaster these past two weeks in terms of its stock price, in terms of its basic financials, and in terms of its vibes are important because they are really what's bridging the gap between the fundamental reality of Tesla's business, it's a car company, and how it's valued, which is way more like a software company right now. Tesla ships atoms, big pieces of hardware with essentially fixed manufacturing costs. It has to buy seats and screens and copper and glass to make every new car, which means its profit margins are more or less fixed, even if sales go up. But a software company ships bits on the Internet.

Software companies just have to engineer their products once, and every additional copy is essentially free, which means every additional sale is essentially pure profit. You can complicate that idea in all sorts of ways, but broadly, that's the story of big tech. It's the story of these huge profit margins in software. And the story of Tesla is really the story of a hardware company trying to find a way to justify a software style valuation against what is very much a hardware business. And it's not just me saying this is the challenge.

It's elon HIMSELF. We should be THOught of AS an AI, robotics company. If you value Tesla as just like an auto company, it's just the wrong framework. If you ask the wrong question, then the right answer is impossible. If you've been following Tesla, you know the gap between what the business is and how it's valued has been getting bigger and weirder for years now.

And lately, with Elon Musk out there saying he's going all in on autonomy and announcing a robo taxi event in August, it seems like we're getting closer to a make or break moment. Especially as competition in the broader electric vehicle market heats up. And cheap ev's from chinese manufacturers enter the global car market at scale. So that's the big picture. Which, even if everything was stable, would require a pretty huge magic trick to pull off.

But over the last few weeks, the little picture, the day to day, of Tesla has been pure chaos. Earlier in April, Tesla announced it was laying off over 14,000 people. And a couple key executives also announced they were leaving. Then Tesla had its quarterly earnings, where cooling demand for its cars led to a 9% drop in revenue and a 55% drop in net income from last year. After all, Tesla's cutting prices to boost sales.

There's that margin problem. On the company's earnings call, Elon floated the idea of running an AWS style data center. High margins, but distributed amongst the chips and teslas, which are sitting parked. That's a complicated idea that might not work. He also said that the company's Optimus robot would be on sale by the end of next year, which I will just tell you, feels like a pipe dream.

Only a few days after that, the National Highway Traffic Safety Administration, Ornitsa, released a report linking Tesla's autopilot and full self driving software to hundreds of crashes and dozens of deaths. It also announced a follow up investigation into the newest version of that software for the same reasons. Then Elon made a surprise visit to Beijing to help pave the way for full self driving to launch in the chinese market. And Tesla announced yet another round of layoffs, including the majority of the supercharger team. Which is interesting, because if Tesla had one obvious advantage over every other ev on the market, it's the supercharger network, which is now opening to other cars.

This is a lot of chaos for a company that needs to execute that huge pivot into being a very different kind of business than it is today, and it needs to do it pretty quickly. So, like I said, Andy and I tried to explain Tesla. You let us know if we pulled it off. Okay, Tesla here we go.

Andy Hawkins, welcome back to Decoder. Hey, good to be back. The last time you were on the show, we were talking about the ev market in general. What was happening to sales of cars. None of that has abated.

But one thing has changed, which is that the Tesla story has gotten even weirder. It's been, I would say, a bad week for Tesla, although the stock price does not necessarily reflect that it's a bad week. They had their latest earnings report. Sales are down. There have been layoffs.

Elon is out there saying he needs to reorganize the company, which is a very decoder topic. There was a National Highway Traffic Safety Administration report blaming full self driving for a number of deaths. Can you explain what is happening in the world of Tesla? The vibes are off, I think, as Liz LePAdo would say, I think that's especially true when you take the earnings report, which came out on Tuesday, then the earnings call with Elon Musk, and then at the end of the week, NHTSA report that you referenced. So we'll start at the beginning of the week.

Andy Hawkins

First, we had what was already expected to be a pretty bad earnings report, and that was reflected in the numbers where revenue is down 8%, net income profits down to 55% year over year. And obviously the company is selling less cars than it has in previous years. And yet Elon Musk comes on this earnings call and says that we're going to make affordable cars. It was not clear that was going to be the case. There was a Reuters report a couple weeks ago saying that he had personally canceled the project for a model.

Model 225 thousand dollars electric vehicle. They said that they were going to make affordable cars, but there was not a lot of detail there. It wasn't clear whether this was going to be a brand new next generation platform or maybe just a cheaper model three or Model Y. But apparently investors liked what he was selling, that the stock popped and the company seemed to be maybe bouncing back a little bit. And then these NTSU reports hit at the end of the week.

First, NHTSA is opening a new investigation into the recall that was the result of the last investigation. Tesla issued a recall for all of its vehicles, recall just being a software update. They updated all of Autopilot, saying that it's going to be harder to misuse more warnings. Now Nits is saying that was insufficient. We're going to investigate the recall.

And they also issued a report from the previous investigation into autopilot, finding that there was a direction correlation between driver inattention and all of these hundreds of crashes that had taken place, dozens of which have resulted in deaths. So kind of a dour note to end on what may could have been the start of somewhat of a comeback for the company. So I want to talk about Elons general reconception of Tesla and all the businesses he thinks Tesla might be in or might grow into. That seems important because it's what's driving the stock price, but it's not what's driving the company, which still, as far as I can tell, is in the business of selling cars. Let's talk about Tesla as a car company for a second, because as a car company it does seem to be struggling.

Neil Patel

And my evidence of that is they just keep lowering prices, which indicates the demand isn't there. There's more competition on the market. Certainly Hyundai and Kia have some great ev's out that people like the Mustang Mach e is out. People seem to like that one. On the luxury side, BMW I four exists.

There's more competition and there's yet more on the way. Is Tesla still competitive in this market or are they just cheaper than everyone else? You could see it across the industry right now. Where Tesla struggles are not just Teslas alone. Ford released its earnings this week.

Andy Hawkins

Its Model e division, which is the one that sells electric consumer cars, passenger vehicles. 80% drop in revenue from the previous quarter of last year. Thats a worse, much worse drop than Teslas. But then obviously Ford has a very robust gas powered business. Trucks, SUV's like that's propping up the entirety of Ford's EV business at the moment.

So it is not just a Tesla problem. And then you've got situations going on with like with Hertz, right? Hertz bought 100,000 Tesla and polestars as a way to launch this new EV portion of its rental car business. And then discovered that the cars kind of suck. They break down.

The people who were renting them didn't really know how to use them and were running into lots of problems, was just enormous and just led the company's stock to just plummet. And now you've got the company offloading over 15% of the EV's that they purchased several years ago. And this was the moment that catapulted Tesla into the trillion dollar company status. So I think it's just so telling now that thing, that moment that made Tesla part of the tea club is now completely being undone. And you're seeing now the company having to slash prices.

The demand is not there. And I think it's a large part of that is that it's still too high for some people. Other people are just not enamored with the whole idea of owning an electric vehicle, that charging doesn't meet their needs. And hybrids are just a lot more of an attractive option for them. Tesla does not have any hybrids in which to fall back on, only electric vehicles, and then that's why they're struggling so much.

Neil Patel

I just want to focus on one PieCe of the earnings report and Elon's comments on the call, that just struck me as being completely disconnected from reality. Elon comes on the call and he says other automakers are pursuing hybrids. We believe that this is not the right answer. Isn't that just blaming people for, like, buying the wrong thing? Like, there's a part of that that's like, that's.

That's the free market, baby. Like, some people would like a hybrid for range reasons or because the infrastructure isn't there for whatever infinite number of reasons people buy things. Can you just blame the market for that? It's a weird position to take because you look at how Tesla, just the origins of the company, it's a pure EV play, right? They are strictly electric vehicles.

Andy Hawkins

They've always been that way since the founding of the company in the early two thousands. So on the one hand, it's clear why he's irritated by the popularity of hybrids. But I think that's also just a reflection of the reality of what consumers are facing on the ground. When they go into dealerships, when they're shopping around, you know, they hear all these things about electric vehicles. They're intrigued by them, but they don't like the reality of what the ownership experience is like.

They don't like having to wait 45 minutes to charge a vehicle at a fast charging station. They don't like not being able to find chargers. And when they do, if they confront, you know, maybe a broken charger. So I think that whole story that Tesla is trying to sell really won over a lot of people at the beginning. And those are the tech focused, Patagonia vest wearing all birds guys.

Like those guys were going to be really easy to win over. It's, you know, middle America, it's average people that aren't paying as much close attention to the Tesla story that are starting to see cracks in that facade. I'm going to ask this question, even though I think everybody knows the answer. Tesla's never going to make a hybrid, is it? I would eat my hat if that ever happened.

It just does not. I mean, it would have to be under a different management structure. I think if Musk was out and it was an entirely different executive team in place, then I could possibly see them putting out probably a really great hybrid. A Hybrid that had over 50 miles of range on battery alone. That would be incredible with some sort of small gas system to back it up with.

But yeah, under Musk won't ever happen. We need to take a quick break. When we're back, Andy and I get into some of the other ways Tesla has been trying to sell more cars, including Elon's social media behavior. And of course, the Cybertruck.

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Neil Patel

We'Re back with verge transportation editor Andy Hawkins to talk about Tesla's sales struggles and why the Cybertruck hasn't really been a home run. The other way a traditional car company would boost sales is to expand the market. Other car companies try different ways to do this all the time. Elon, I think, has taken the most unusual tactic, which is turning away from the Patagonia lefty bros who might buy Ev's and turning towards a much more conservative segment of the population. He's on Twitter, he's embracing right wing politicians.

He's fighting against the woke mind virus. Whatever he's doing over there, he's certainly embraced a part of the population that was not inclined to buy an EV that is, I would say, much more inclined to roll coal in their hd pickup trucks. Is that working? Is he selling EV's to bros in red states? Is that working at all?

Or is it just making him a billionaire that they happen to like? Who made his money selling a product they won't buy? I mean, I certainly haven't seen any evidence of red states suddenly waking up to the urgency of climate change and the need to decarbonize your lifestyle. And if anything, you know, as witnessed through the last primary that we just went through, the presidential primary, they're hardening their message. The fact that Joe Biden has embraced Ev's as a major part of his climate agenda has completely turned off a whole segment of the population that take their cues from Donald Trump and from Fox News and from other places.

Andy Hawkins

It is endlessly ironic to me that I think I just saw a report this week that he's considering even going so far as to endorse Trump, which, like, I would love to see the truth social post from Trump after that happens sometime. Something, no doubt about musk coming crawling back or some, something to that effect. But, you know, like, it's, it's just, it's amazing to me because that is not translating into sales for the company. It won't, as long as Ev's are so politically polarized in this country. So it does seem to be a misguided tactic on his part to have gone the way that he has politically.

Neil Patel

I feel like somehow this has brought me directly to the Cybertruck. We were going to get there. It was an all of these threats all together. Here we are at the Cybertruck. The best selling cars in this country are pickup trucks.

They have been for a long time. I think Ford at this point just has a macro to issue. The press release saying the f 150 is the best selling car in the country every year for the past 40 plus years. They're expensive, right? They're really high margin vehicles for these carmakers.

They're popular, obviously, in red states. They signify a whole lot of things to a whole lot of people about America. Elon Musk turns to the right, he sidles up to Trump, and he's like, we'll do a pickup truck. And then he chooses to do the cybertruck. The cybertruck itself is having problems as a product, but it's also just not if you're gonna go try to get that base of buyers or voters or whatever Elon thinks of those people.

The cybertruck is not the easiest sell in the world, is it? No, it definitely isn't. It's, first of all, it's extremely expensive. It's over $100,000. So that already is going to make it only attractive to a certain segment of the population that can actually afford it.

Andy Hawkins

It's mostly just an attention attractor, right? I've read all of these experiences from people. Marques Brownlee had a great one, and I read one just the other day in car and driver. The amount of attention that you attract when you're driving around a Cybertruck is, I think, in inverse proportion to its utility as an actual truck. And I think that's, that's certainly the case.

If you just look at the truck market as a whole. It's extremely loyal. They wanted to do truck stuff. They wanted to do towing and hauling and all of those things. And the Cybertruck, like most electric trucks, kind of suck at doing that kind of stuff.

Half of your battery power vanishes as soon as you start hauling something that's heavy. It just doesn't perform well in certain terrains. There's just been numerous videos of the truck getting stuck on beaches and in, you know, like, two inches of snow. It just doesn't seem like very adept at doing the things that truck owners want their trucks to do. And there's a recall, right?

Neil Patel

All of the nearly 4000 cybertrucks sold since launch are affected. What happened there? It seemed like an inevitable action to take because we've seen a number of people post videos showing that there's a major flaw with the acceleration pedal. The COVID on the pedal was slipping off and getting stuck underneath some of the interior trim, essentially turning your truck into a cruise missile, which I've heard is not a desirable thing to want to drive. And so the company had to recall it.

Andy Hawkins

And it was, I think, discovered as part of some of those documents that released that the factory workers were using soap that had dissolved the adhesive that was supposed to keep the COVID on the. On the pedal itself. It just seems like not, you know, not the kind of quality that you would maybe expect from. From a company like this. Or maybe it is.

Neil Patel

I don't know. There's a part of me that says the Cybertruck is a good idea in one way, which is more companies should do completely outlandish things and invent new processes for making cars out of stainless steel. Like, fine, I love it. Go get it. But then there's a part that says, well, they spent all of this time and money in capex on building a cybertruck factory and stamping stainless steel and figuring out the windshield wiper and all of that would have been better served with a total refresh of the Model Y, which is the volume seller in the biggest category in America.

Midsize SUV's in the world. Biggest car in the world to be sold last year. Is there a reason that Elon isn't building upon the success and he's instead insisting on figuring out new, ever more difficult manufacturing processes? Are you asking me to look within the mind palace of ElON MUSk? Because it's been a week, Eli.

Andy Hawkins

I don't want to keep doing that. Fair enough. I'm just focused on the company as a car company. Cause it's very obvious to me that the story of Tesla is there's a car company here, and all of its valuation is AS a software company. And Elon has to somehow BACk HimseLf into being a software company.

Neil Patel

He has got to back himself into Uber, which is a taxi company that doesn't own any taxis. He's got to back himself into AWS, which is a cloud computing system that charges everybody for cloud computing capacity, but doesn't actually have any retail customers. You got to back your way into these infinite software margins, but it turns out you run a car company, and spending a lot of capex on the next model three or Model Y is just an inherently unsexy thing to say to your investors. But spending a lot of capex on. I made a triangle out of stainless steel, might excite people in a way that the software version of your company might excite people.

That's just the tension I'm just sitting with is if you let the car company fail, you're never going to get to the software company. He just seems fundamentally uninterested in running a traditional car company. Because if that were the case yet, then, yes, we'd have a Tesla version of the Toyota Camry, and we'd have a Tesla version of the Honda fit and all of these other kind of smaller midsize sedans and hatchbacks that a lot of his competitors have abandoned. And now they're starting to realize that maybe they need to be back in that business. Ford this week was saying, we need to get back into small cars.

Andy Hawkins

There's a whole segment of the consumer base that we're ignoring by just producing giant trucks and suv's. So you would think that Tesla, if it wants to remain competitive and stay on top of its game and remain the number one seller of the vehicles that it sells, would also be exploring ways to appeal better to people who want smaller vehicles, more affordable electric vehicles. But yes, you're right, it is not a sexy message to sell. And I think it just goes to show, sort of fundamentally, how unsustainable the company being the most valuable car company in the world was ultimately going to be. It needed to come back down to earth.

It needs to be seen and valued in the same way that more boring companies like GM and Stellantis are, because it's just not possible to stay at this elevated level that's just here in the States. Those are the big three here in the States. Globally, though, there is an enormous amount of competition, particularly in China. Last quarter, a chinese company called BYD overtook Tesla as the world's biggest seller of EV's, the BYD vehicles. If you haven't seen them look them up.

Neil Patel

They look great, actually. They are unflinching copies of more famous car designs. They're not shy about pulling design language from very successful car designs in the past, but they're doing it. They're selling a lot of them. The chinese government is obviously subsidizing some of that price.

So they're cheap. That's how they're going to build a foothold. You can think what you want about that, but it's happening. Can Tesla compete with that? With a totally frosty relationship with our government, on the one hand, increasing competition from domestic suppliers, on the other hand?

Andy Hawkins

I mean, it seems like in some respects, like, Joe Biden is Elon Musk's best friend at the moment, right, because he's doubling down on Donald Trump's trade policies and tariffs. So at the moment, it remains cost prohibitive to sell a chinese electric vehicle in the United States. And that could remain so if. Unless they bring the cost down so much that it actually is fine for people to pay the tariffs on whatever the end price ends up being, especially if BYD and others follow through on their plans to start building out production capacity in places like Mexico. So it does seem to be that it is this looming specter not only over musk, but obviously the domestic automakers as well, because there is just no way that they can compete with electric vehicles that are being sold.

I think that, like, the BYD has one that's like $13,000, the Seagull, which is just, you know, like, that's. That's the sweet spot for. For most people. You talk about mass adoption, $13,000 is. Is the sweet spot for that.

So it does seem to be the thing that is kind of weighing down the company. And you're seeing sort of like this reversal, especially in China, where Tesla came in and kind of helped jumpstart the whole EV market in that country, and now the country is kind of turning against him. So I'm sure he's a little salty about all that. Just a day or two after Andy and I recorded this conversation, Elon Musk made a surprise visit to Beijing, where he met with chinese regulators to help pave the way to launch full self driving, which had been held up in China for data security reasons, according to the New York Times. He also separately inked a deal with Baidu for high resolution maps of the country's roads.

Neil Patel

That visit put Tesla on better footing in China for its autonomy rollout, and it led to a pretty significant jump in the company's stock price. But two big issues remain. One is that Tesla is still competing with BYD and other chinese automakers in a fiercely competitive market where it's being undercut on price. BYD also received approval for its self driving tech to be used in China. On top of that, Tesla's advantage in that states only exists because we put huge tariffs on chinese cars to protect american car makers.

But as you'll hear Andy explain, that advantage comes with a unique labor challenge, one that's inevitably coming for Tesla. There is a bunch of what you might call protectionism in the United States around our car industry. Obviously, the Biden administration, the Trump administration, want to keep the chinese makers out because they're being heavily subsidized by the chinese government, letting those costs be really low. And on the other side, there's protectionism on the labor front, right? The unions.

The UAW does not want the electric car industry to take away a lot of jobs that the ice production line involved. Right? Like building an ice car is more complicated than building an ev. Maybe some jobs are going to go away. You can see the unionization efforts are picking up in places where they haven't before.

Every time it announces a new ev, Jim Farley is on stage with the UAW being like, we're doing this together. There's a need to preserve that balance there. Tesla has historically been very frosty with any unionization efforts, but now it's starting to happen to Tesla as well. Is that going to be a problem for Tesla? Can Elon deal with it, or is it just going to be an increasing level of cost on top of everything else?

Andy Hawkins

It's definitely going to be a problem, especially if the UAW finds more success. They just unionized a Volkswagen plant in Tennessee. It seems like, you know, they have designs on the rest of the auto industry that is headquartered in the southern states. And then they have also said, Sean Fein has said Tesla is in our sites as well. Sean Fain is the head of the Uaw.

Correct. It should be said that the union has had a lot of difficulty unionizing Tesla in the past. There have been attempts. They have not had much success. The company has a very bad relationship with the National Labor Review Board, for example, and has been accused many times of union busting.

There have been lawsuits filed against them for racism and gender harassment and all sorts of terrible things that it seems like union would be a good thing for Tesla and help them clean up the process that's been going on there. But that said, you've also had these massive layoffs. The company just laid off around 10% of the entire workforce globally. That's amounting to at least 14,000 people. There have been reports that it could end up being more.

I think Bloomberg had a report stating that Elon actually wanted to cut 20% of the company because that's how much their margins have dropped year over year, which is just such an EloN ThinG to want to do. But it's looming in the horizon. It's not quite yet at their doorstep. But yes, it does seem that inevitably UAW is going to come for Tesla, and at that point, what it does to its costs, you know, we'll have to wait and see. We have to take another quick break when we're back and I get in the future of Tesla AnD its ambitious plans for a robo taxi.

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Neil Patel

Were back with Verge transportation editor Andy Hawkins talking about the future of Tesla and why Elon Musk is going all in on autonomous vehicles. But first, here's some context around those layoffs. You heard Andy mention those happened in April. They hit more than 14,000 employees. But earlier this week, Tesla did it again.

It laid off hundreds of more people, including its senior director, for EV charging and the majority of its 500 person supercharger team. This news is wild because it's coming on the heels of virtually every carmaker in North America signing on to use Tesla's charging standard and gain access to the supercharger network. So while Tesla says it will still build and maintain its supercharging network, it's not responding to the increased demand it's going to see from all of the cars in North America that can now use that network and potentially pay Tesla for it. And on top of that, Musk announced these layoffs by saying Tesla needs to be, quote, absolutely hardcore about headcount reduction. So it doesn't seem like the chaos is ending anytime soon.

In order for Elon's plans to succeed, a lot has to happen between now and August. That's when Tesla is supposed to unveil the Robotaxi, which is an ambitious plan to turn Teslas into driverless cabs. Elon has said this will be a combination of Airbnb and Uber, where you will buy a Tesla and then rent it out to operate in a fleet of autonomous taxis when youre not using it. Hes called it the cybercab now. But lets just stick with robotaxi because im not sure if thats real.

To do that, Tesla has to have autonomy working. The car has to be able to drive itself. Regulators have had to approve it driving itself. Everyone has to be okay with it driving itself. This isn't autopilot or even full self driving, which I'm saying in quotes because it's not quite full self driving, but true autonomy because you can't have the robotaxi without the robot.

And yet, as we're talking, the United States government is investigating the company's self driving tech and whether it's safe. How does Tesla Square these two things? I think to be clear, it was mostly about autopilot, although full self driving definitely had a cameo, and it was, you know, a pretty damning report. The federal agency investigated nearly 400 crashes since 2018 involving Teslas with Autopilot engaged and a few of them with full self driving. There were over 40 deaths involved in these crashes.

Andy Hawkins

And I think the government said that a not insignificant number, you know, at least 13 were because the driver was not paying attention, that it was autopilot was on and the driver was doing something else, which Tesla explicitly says do not do. You need to watch the road while using Autopilot. You need to watch the road while using full self driving, despite it's misleading marketing and branding. So it's, you know, all of this sort of is, is converging now, right? We've got on one hand the CEO saying full self driving works.

To actually not use it is to actively be killing people, is what Elon says. If you don't allow people to use autopilot and full self driving, you are going to be killing people because our cars are safer than cars without this technology, and then you've got the government on the other hand, saying, well, that's just patently not true. There have been people dying in your cars because people are using them and becoming too complacent. They don't have enough time to react, to take back control of the vehicle. And the technology itself just can't recognize basic things.

If there's a truck coming along in front of you, a tractor trailer blocking the path of the car, your car will one right into it, you will be killed. As has happened several times. All of a sudden, full self driving is going to erase all of these problems with driver inattention, complacency, bugs in the software, problems with the technology itself. It seems like that's not enough time. Like you've got companies like Waymo that have been working on this problem for decades and they are still too scared to put their cars on freeways.

So I don't know how we get from, from today with this report and the technology as it is today, to a completely functional feature, complete, as he likes to say, robotaxi in August. I'll say we had the CEO of Waymo on decoder last year. I asked her, can you run this thing in the snow in Denver? And she was like, not yet. She's like, I think she said, we tested it and Thunderstorm is in Miami, but we're just not going to do that yet.

Neil Patel

They're in Phoenix, in San Francisco. They're in places with reasonably predictable, very clear weather conditions. If you're going to launch a robotaxi service at scale that gets you the software margins, you got to be able to deal with Miami, right. That's just like straightforwardly a thing you're going to like. You need to service the big market.

You need to be in Wisconsin and Denver and wherever else that has not Phoenix's weather conditions. And I can see that being this is going to be sort of what we get in August, right? That he comes out on stage and says, it's ready, it's here. You can only use it in downtown San Francisco, or you can only use it in Austin, Texas, or what have you. It's going to be some sort of extremely limited, available only to a small number of people.

Andy Hawkins

Sort of like this is going to be our service area, our operational domain, and this is, and he's going to blame regulations. He's going to blame, you know, the states or whomever he has to blame. But it's going to be a very smaller, a lot more focused version of what has been sold to us for the last decade or so. The other thing that underlines autonomy is just how it's being done. TeSla very famously does not use Lidar.

Neil Patel

Waymo uses Lidar. All the other car companies use lidar in some way or another at their highest levels of whatever autonomy they offer. There's been a lot of criticism in this decision for Tesla that they chose the wrong path, technically, and now they're stuck with it. To add Lidar would be even more cost on cars that are declining in price, which would further compress their margin. As everything else is getting tighter.

Do you think they'll ever make the change? Has he hinted there might be another way to do it or a better way to do it? No. I mean, he was saying it just in this last earnings call about the fact that. How they just use vision cameras only and are not weighed down by all of these bulky sensors, expensive sensors, cameras, radar, lidar, ultrasonic.

Andy Hawkins

And that's always been the fundamental difference between Tesla and the rest of the. The autonomy companies is that they're a car company, like we've said. Despite all of his insistence that it's not a car company, they are still a car company, and they need to sell cars. And you can't really sell cars at scale with Lidar on them, at least not yet. You know, you can't really amortize that cost out enough to the point where your margins remain the same.

And I think that that's why Waymo cruise, for all its problems, Zoox, all these others, these are fleet companies, right? They're fleet CAr companies. They're not selling you cars. They're selling you a service. And Tesla still needs to sell its cars.

And that's why there's this disconnect on the hardware. All right, to bring this home. One of the things that I often laugh at is the amount of analyst fan fiction about Tesla that's written, and you see it before every earnings call. Like, here's what we need to see Elon say, in this earnings call to get Tesla back on track. And then it's fan fiction.

Neil Patel

It's like, announce a cheaper car. Do this other thing with autonomy. Put a realistic timeline for X proxy that has been floated for five years with no ship dates. FAN fiction. There's no other Way to describe it.

And every time I read it, I'm like, what you want is a different person to be the CEO. Cause you're not gonna get this out of Elon Musk, for all of his strengths, for all of his weaknesses, he's not the person who's gonna deliver the fan fiction version of the Tesla CEO that people often write where he's like, we're doing this, we're doing that. Here's a timeline that's shipping. He's off in the clouds. Is it realistic that these shareholders would ever say, you know what, actually, it is time for a new CEO?

Andy Hawkins

I mean, they've been presented with so many opportunities to reduce his power or, you know, have some sort of different situation with the board. And as we've seen time and time again, they continue to throw all of their hopes and dreams in the Musk rocket ship. And I think that's certainly going to be the case, too, for the company's shareholder meeting later this year, where they are going to be presented with yet another opportunity to approve his massive pay package that was previously thrown out by a court judge in Delaware for being just, you know, entirely too rubber stamped for, I think, a public company. $56 billion. When you've got a board, half of which are best friends with the CEO, I think we're going to see that on display again later this year when they're going to be asked to approve this pay package.

Despite all of the companies very obvious and transparent problems that it's having, it seems like not the greatest time in the world to say, this man deserves this gargantuan sum of money when the stock price is down 40% since the beginning of the year and revenues are down and profits are down, and there's not really a clear sign that that's changing in the near term. So it's really just kind of fascinating to me how shareholders and investors and analysts kind of build up this image in their minds of what this company actually is versus what it. It really is. In reality, the harshest criticism I have seen of Tesla recently came from Dustin Moskowitz, who's a co founder of Facebook, now the CEO of Asana. He put on threads the other day, folks, this is just Enron now.

Oh, God. Right? He's like, the data doesn't. They're making up the data, and even the data they're making up doesn't line up. Right.

Neil Patel

Like, it's just headed that way. Like there's a fraud here that will out itself. Do you think it's that bad? I don't Think it's that bad. I mean, the company still makes cars.

Andy Hawkins

People like the cars. It is. There is. I MEAN, there's a product, riGht? There is a product.

There's new products. The Cybertruck exists after for so long, us thinking that it was just a, you know, a fever dream, a collective fever dream that we all had. It's out in the world today. People are driving it. They're getting their accelerated.

Pedals are maybe stuck, but, yeah, go get that recall. I don't think it's as BAd as some of those companies are in the past. I just think it's coming down to earth. It's a cold dose of reality for Tesla and its fans, and it's bull market. And I think that's Just going to be, like we've said many times so far in this conversation, TesLa is just a car company.

Despite all the assurances that we've HAD that it is anything But. I think it's just going THROUgh car company problems. All right, well, andy, I suspect on October 9, we're GONna have you back to see if this robotaxi event can turn Tesla into something other than a car company. Thank you so much for being on Decoder. Oh, it's my pleasure.

Thanks, Neelak.

Neil Patel

Thanks again to Andy for joining us on the show. We hope you enjoyed it. We hope you succeeded. If you have thoughts about this episode or what you'd like to hear more of, you can email us@decoderge.com. We really do read all the emails.

Oh, boy. Or you can hit me up directly on threads. I'm eckless 1280. We also have a TikTok. You can check it out.

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If you're a Tesla fan and you hated it, just don't do anything. Decoder is a production of the Verge and part of the Vox Media podcast network. Today's episode was produced by Kate Cox and Nick Stat. It was edited by Cali Wright. Our supervising producer is Liam James, and the decoder music is by breakmaster cylinder.

We'll see you next time.