Has Elon Musk driven Tesla off track?

This episode explores whether Elon Musk is more of a liability or an asset to Tesla, particularly focusing on the problems with Tesla's Cybertruck.

1. Tesla's Cybertruck has faced multiple operational and safety issues since its launch, affecting the company's reputation.
2. The electric vehicle market is rapidly evolving, with increasing competition from both established automakers and new entrants, particularly from China.
3. Tesla has had to adjust its business strategies, such as price reductions and workforce cuts, to stay competitive.
4. Elon Musk's leadership style and external engagements, such as his involvement with Twitter, raise concerns about his focus on Tesla.
5. Despite challenges, Musk's vision and initiatives, like potential autonomous robo-taxis, continue to drive investor confidence in Tesla.

1: Introduction to Cybertruck

Describes the unique, futuristic design of the Tesla Cybertruck and initial reactions to its appearance. Problems with its durability and performance in ordinary conditions are highlighted. Kerry Paul: "It does not look like a car that you would see on our highways."

2: The Market Shift

Discusses the growing competition in the electric vehicle market and Tesla's responses, including price cuts and layoffs. Elon Musk: "This will enable us to be lean, innovative, and hungry for the next growth phase cycle."

3: Leadership Under Scrutiny

Evaluates Elon Musk's impact on Tesla, questioning whether his other business ventures distract from his duties at Tesla. Kerry Paul: "A big concern for Tesla is whether Elon Musk is focused enough on running the company."

1. Research Before Buying: Consumers should thoroughly research vehicle performance and company reputation before making a purchase.
2. Investor Caution: Investors need to assess leadership stability and market competition when investing in tech companies.
3. Embrace Innovations Carefully: Companies should balance innovation with practicality and safety in product design.
4. Stay Informed: Keeping up-to-date with market trends can help consumers and businesses make informed decisions.
5. Evaluate Leadership: A company's leadership should be evaluated on their focus and impact on the company's core mission.

The electric carmaker’s Cybertruck was recalled last month after safety concerns emerged over the accelerator pedal. Kari Paul reports. Help support our independent journalism at theguardian.com/infocus

People

Elon Musk, Kerry Paul

Companies

Tesla

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Guest Name(s):

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Content Warnings:

Contains mild swearing

The Guardian

This is the Guardian.

Today is Elon Musk, Tesla's biggest liability or their best asset.

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Before we start, a warning. This episode contains just a little bit of swearing.

Kerry Paul

It's made out of steel. It is boxy and strange and robotic looking. It does not look like a car that you would see on our highways. Kerry Paul is a technology reporter with Guardian us, based on America's west coast. And she's describing the newest vehicle from the pioneering electric car company Tesla.

One of my colleagues described it as if a young boy drew a picture of a cool truck and then it was made into a truck. This is the new Tesla Cybertruck. And it's a little bit like. Actually, it's not really like any other car I've ever driven before. The angles of this truck are so sharp that there are places where you can clearly cut yourself on it.

The cybertruck was launched late last year, turning heads wherever it appeared on the roads. I live in the Bay area, so they are out and about in the Bay area. And when you see them, it is very jarring. It looks like something between, like a spaceship and an army tank. It can tow, it can haul.

Elon Musk

It's extremely comfortable. The suspension is amazing. We have seen a number of celebrities post on Instagram about their cyber trucks. Jesse, how do you like the truck? We've had Lady Gaga, which to me might be the only celebrity who makes sense to have a weird cybertruck.

Kerry Paul

And then we also had Katy Perry, Kim Kardashian, and then most recently, Meek Mill tweeted that his cybertruck crash. Look at this right here where the brake, the whole brake pedal came off the first day. I never seen no car the first day the brake pedal came off. The fate of Tesla's Cybertruck has become, for many, a symbol for Tesla itself. Big on futuristic visions of the kind championed by its billionaire CEO, Elon Musk.

But in a changing market, in difficult conditions, struggling to stay on track.

From the Guardian, I'm Michael Safi. Today in focus how Tesla went off road and whether it can find its way back.

Kerry? Tesla has been hyping up this car, the Cybertruck, for many years now. They held the launch event back in 2019, and it did not go to plan. Franz, could you try to break this glass, please?

Elon Musk

Yeah.

Sure. Yeah.

Elon Musk

Oh, my Viking God. Well, maybe that was a little too hard.

That was Tesla's head of design accidentally smashing the windows of the car he was there to launch. Clearly, the Cybertruck needed more work. And years later, in December last year, it finally launched. But that wasn't the end. End of its problems, was it?

Kerry Paul

Yeah. Since its launch at the end of 2023, there have been a number of publicized issues with the Cybertruck. These are ranging from kind of embarrassing for Tesla to very dangerous. Quite early in the Cybertruck launch era, there was a huge snowstorm at Lake Tahoe, which is a Bay Area vacation spot for a lot of folks. And so people had their cybertrucks there, and there were a couple videos of cybertrucks getting caught in the snow.

This is supposed to be, as Elon said, the best off roading vehicle on the market, and it could not go through snow. While the Cybertruck was trying to make room on the road after getting a Christmas tree, the vehicle began to slide down the hill. The driver said it was a prototype and had issues with its four wheel drive. Ford CEO Jim Farley reposting the video to Twitter or X, saying, glad a Ford owner was there to help. You know, there were other videos where it couldn't handle sand.

It got stuck on the beach. Today is March 4, and some dumbass decided to take his Tesla onto the sand. It got stuck in dirt going up a hill. Is it even on? Yeah, it just can't seem to handle off road conditions like it was advertised to.

And in addition to that, a lot of people were complaining that the stainless steel outside of the car rusts very easily. It can't really withstand just simple rain. All right, so I'm here in Tampa checking out Miguel's brand new cybertruck. He actually just got it yesterday. And it's interesting because an issue he's having.

I've heard nothing but articles everywhere about rusting on a cybertruck. Does the Cybertruck rust? It's supposed to be stainless steel, right? There was also a report that the front window cracked almost immediately in a hailstorm. So a lot of the traditional car design features that Tesla abandoned because they wanted to be different existed for a reason.

Kerry Paul

And when they steered away from that, they have seen a lot of problems. Okay, so this is a car with issues, to say the least. It is rusting. It potentially struggles in off road conditions, in snow and rain. And since then, we've learned about a problem with the Cybertruck that is much more serious.

Tell me about that. Yeah, so a couple weeks ago, Tesla recalled voluntarily all of its Cybertruck models that had been shipped thus far, which is upwards of 3000 trucks. This is because it had gotten reports that the accelerator pedal had a loose piece that could come off and lodge itself under part of the vehicle while driving, which would then kind of get the accelerator pedal stuck and cause the car to go. Let's talk about a recall now on thousands of Tesla Cybertrucks due to a pedal problem. One Cybertruck driver raised concerns after they found that the car's accelerator could become stuck to the floor.

How unusual is that for a car company to have to just completely recall an entire model? So it's actually not totally uncommon for an auto company to issue a recall. You know, there are hundreds per year. I think because of the high stakes of this vehicle. For Tesla, it's particularly bad for the company and also because of the nature of these vehicles.

Kerry Paul

I mean, this is a many thousands pound steel truck hurtling down our highways. Any type of safety issue is very concerning. It's unclear just how common this issue is and the extent to which the recall will impact the vehicle going forward. But it's definitely not a good look for Tesla. It's not a great look, though.

Tesla have said that they will replace or repair the accelerator pedal assembly at no charge for any customers. How big a deal is this Recall for Tesla? How important was the CybertrUck to their business? Yeah, so Tesla had not released new projects or directions in a while. So investors were really looking to the Cybertruck to be a change of pace for Tesla, or at least a sign that it was going in the right direction of trying new, Exciting Things.

Kerry Paul

Kind of the reason that investors come to Tesla to begin with. And also, I think because Elon Musk has made this his pet project and invested so much time and resources into it over the years, there was a lot of pressure that it would be successful to kind of justify the amount of attention he had put on the CybertrUck and also taken away from Tesla's other products.

This big flagship truck gets launched and then is recalled weeks later. And it's emblematic of a company that for so long was seen as the great hope of electric cars. And now suddenly looks a little bit vulnerable. Tell me about how the ground has been shifting under Tesla's feet over the past few years. Tesla really paved the way for a mass market electric vehicle.

Elon Musk

And I want to emphasize, I want to emphasize that even if you buy no options at all, this will still be an amazing car. You will not be able to buy a better car for $35,000 or even close, even if you get no options. So I think they kind of got in the market early. But since then, many long standing car companies have released their own electric vehicle models. And then you also have foreign car companies, especially in China, increasingly producing electric vehicles and at a much cheaper price.

Kerry Paul

The biggest competitor kind of coming up on Tesla is this chinese automaker BYD. It's actually backed in part by Warren Buffett, has a lot of big name investors. It's much talked about right now. And it took over Tesla as the world's top selling EV company last quarter of 2023. And Elon Musk was even quoted as saying, if there are no trade barriers established, this company will pretty much demolish most other car companies in the world.

We are byd, you've probably never heard of us, so we could tell you that we are one of the largest manufacturers of new energy vehicles in the world, or about our cutting edge, blazing battery technology and our commitment to sustainable mobility. But, hey, we know you just want to drive a great electric car.

Kerry Paul

So there's been a big pressure on Tesla to make things work. They've done a number of things, including slashing the prices of some of their vehicle models to kind of increase demand and maybe match some of the competition. And then Tesla announced it is cutting about 10% of its global workforce. They ended last year with about 140,000 employees worldwide. So approximately 14,000 workers will be let go.

Elon Musk

In the memo that was sent out from Elon Musk, he says, there is nothing I hate more, but it must be done. This will enable us to be lean, innovative, and hungry for the next growth phase cycle. So there are a number of ways the company is trying to meet some of these economic demands that they've been experiencing. Tesla's pitch is that it's this premium brand. It's innovative, it's building the future of transport.

But then they've also had a series of scandals that really undermine that image. What have they been? So, Tesla has long promised full self driving capabilities, and that is when the car drives completely without human intervention. We see that in San Francisco now with the self driving cars that people can now hail with an app. Autopilot is kind of a step below that, kind of similar to when you set a cruise control on your car when you're driving on the highway, and it just keeps it at the same speed, but it's a bit more advanced than that, and it's supposedly able to, you know, change lanes and do a lot of driving features on its own.

Kerry Paul

Autopilot consists of features that make your car safer and more convenient to drive. We're excited about the future, but today you must be fully attentive and have your hands on the wheel at all times while driving, regardless of what features are active. Tesla's autopilot feature has been cited as a reason in a number of crashes, some of them fatal, which has led to class action lawsuits and individual lawsuits against the company. Tesla has settled a high profile case involving a driver who died after his Model X crashed while the autopilot was on. Jury selection for the wrongful death trial was set to begin today.

Former Apple engineer Walter Wong died when his Tesla hit a concrete highway median in the South Bay back in March of 2018. We've seen, you know, you're on the highway with autopilot activated and someone abruptly changes lanes in front of you. The car is not able to react, and often the driver is not paying attention because the driver is sort of relying on autopilot and thinking it's working better than it is, and then, you know, crashes occur. It's a big concern for Tesla and obviously for consumers.

Ok, so that is quite a big problem. But it's not the only place that Tesla has had a bit of a troubled year. Another area is in its supply chain, its ability to actually make the cars that its consumers are buying. What kinds of problems has it been experiencing? Every electric vehicle manufacturer has major supply chain issues.

Kerry Paul

There is just simply not enough battery capacity in the production. Many of the electric cars on this floor are already on limited availability. And one supply chain expert tells me that's because of a lithium shortage, which is essential in these batteries to get these cars running and on the market. We've seen demand for a number of Tesla vehicles fall, especially recently. But over the last few years, Tesla has also struggled to meet demand in different capacities.

In some markets, they have slowing demand, which has caused them to slash prices of vehicles. Now, Elon Musk has been clear. He does not believe that labor unions are in the best interest of the company. Tesla has also faced a strike from swedish Tesla workers. He points out that Tesla has given their workers better pay through stock options, et cetera.

Elon Musk

And that there's no reason to be a part of a union. Obviously, they have production all over the world, and they've had a number of issues in Tesla factories, including in California. They were hit with a lawsuit over discrimination and other issues in the factory there. So they've been navigating issues, both with workers as well as the supply chain, for quite some time now. Why do you think it is that Tesla, despite entering the market much earlier than other people, has struggled so much to compete with all of these new entrants?

Kerry Paul

A lot of analysts and investors would say a big concern for Tesla is whether Elon Musk is focused enough on running the company. He obviously has a number of companies that he's running, most recently Twitter, now called X. So he may be a bit scattered. And that's a concern investors have. And it's a question that comes up often on earnings calls to elon, KinD of ASking HIM, how can we be SUre that you're focused on TESLA and the future of TESLA when you have so much on your plate?

Okay, so let's talk about Elon Musk. How much money does he make off of Tesla? Elon Musk is frequently in and out of the top spot for the world's richest man. Obviously, he has quite a lot of wealth, and Tesla is a big part of that. Musk thinks he deserves quite a lot of money for running the company.

Kerry Paul

The most recent and most high profile battle over this was a $56 billion compensation package. Did you say $56 billion? Yeah, that's billion with a b. Musk battled this into court, and the compensation package was rejected by a judge. It seems that Musk is going to ask that such a package is reinstated.

So he does clearly think he deserves 56 billion over the course of ten years. So, Kerry, you're saying that this guy wants $56 billion when he's made 14,000 members of his staff redundant? He's facing lawsuits over safety concerns on the cars and having to recall this, like, signature Cybertruck. How can he possibly justify that? It's very hard for me to get into Elon Musk's brain and figure out how he is justifying this.

We would not want you to have to do that, I think for your own safety. He is one of those tech people who very much insist that he works very, very hard and argued that that pay package is not unusual and that he deserves it, especially for work. In the past, shareholders have argued that he does not do enough work to get that much money, although many would argue that no one does enough work to get that much money. Coming up, an earnings report and a trip to China that turned Tesla's fortunes around. For now.

The Guardian

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So, Kerry, you've been telling us about the ways that Elon Musk has become a bit of a liability for Tesla. But this story is actually a little more complicated. And we saw how over the past week with two big developments. One of them was a quarterly earnings report that the company put out a couple of weeks ago. What did that report say?

Kerry Paul

On its face, it didn't look very good. They had a revenue miss, which means that they posted less revenue than investors had anticipated. They had a 9% drop year over year in revenue, which is the biggest decline it's seen since 2012. And their profit was actually a 55% decline from the same time of 2023. So on its face, it looked pretty bad.

But strangely enough, the shares in Tesla surged about 10% in after hours trading. So due to some other announcements made in that report, investors were still pretty confident in the company. Explain that to me. How could a company post the biggest drop in revenue since 2012, a 55% drop on this time last year, and still find that its share price went up? I would say theres three main reasons.

One is that they announced that cheaper vehicles would be hitting the market sooner than expected. They had initially anticipated end of 2025. Now theyre saying perhaps end of 2024 or early 2025. So that really heartened investors who are worried about cheap vehicles from chinese manufacturers encroaching on that market. Tesla also announced it was laying off about 10% of its workforce.

And investors always love layoffs. It makes them think that the company is being frugal and cost cutting. The savings generated are expected to be well in excess of 1.1, excess of 1 billion on an annual run rate basis. And then Tesla's plans to make a fleet of robo taxi or ride hailing apps kind of integrated into Tesla products. We're seeing fully self driving cars hit the roads in San Francisco, for example, with Cruise and Waymo, and Tesla's kind of trying to move into that market.

Elon Musk

I'll go back to something I said several years ago, that in the future, gasoline cars that are not autonomous will be like riding a horse and using a flip phone, and that will become very obvious in hindsight. So that kind of heartened investors, even though, like many Elon Musk announcements, it's unclear when that will be available. How credible are those claims that Tesla might very soon become a company that operates a fleet of autonomous robo taxis? Elon Musk is known for throwing out kind of outlandish ideas during earnings reports. It's interesting, as a tech reporter, I cover many companies earnings reports and companies like meta or Alphabet.

Kerry Paul

You would never hear Zuckerberg go off script during an earnings call, but Musk will kind of just go on a tangent. As I've said before, I think Optimus will be more valuable than everything else combined, because if you've got a sentient humanoid robot that is able to navigate reality and do tasks at request, there is no meaningful limit to the size of the economy. And he will often just throw out an idea or elaborate on a previous Tesla product that hasn't been talked about in a bit. And this earnings report, he talked about the humanoid robots that they're trying to launch and said that they will be functional soon. We obviously have no idea how functional they are, if and when a launch could ever happen, but it's just one of the many ideas that Musk kind of weaves into to his calls.

So despite the numbers not looking good, Musk is able to rally shares in the company off the back of one of his famous visionary promises, even if it's unclear whether he can actually deliver on it. The other big interesting moment was Musk's trip to China just in the past few days. What did he do there? Elon Musk made a surprise visit to China this week, in part to sort of lobby for the future of Tesla. The Tesla chief, Elon Musk, has met government officials in Beijing.

Chinese state media is reporting that the tech entrepreneur is thereby invitation for the promotion of international trade. One of the big issues is that he would like to roll out full self driving capabilities there, but China has pretty strict data and privacy laws, so he's kind of working to find a system that would work in terms of migrating some data overseas. And this was a successful trip for Musk. He had a meeting with chinese lead Premier Li Chang, who praised Tesla as a successful model for US China collaborations. Musk began his surprise visit to China on Sunday, meeting Premier Li Qiang in Beijing, one of the world's richest men, was reportedly here to discuss the rollout of Tesla's full self driving software and ask for permission to transfer chinese data to the US.

Kerry Paul

Following Musk's visit, the China association of Auto Manufacturers said that some of the vehicles had now passed China's data security requirements. And in addition to that, he reached a deal with a major tech company in China to form a partnership on mapping and navigation functions to kind of help roll out the full self driving system. So this was a big win for Tesla. And we saw Tesla shares bump up about 6% following these announcements. I mean, it sounds like alongside being a problem for the company, with his embarrassing online Persona and his increasingly erratic personality, Musk is still able to convince investors to pile money into Tesla.

He's able to go personally to China and broker these deals which get the share price surging. As well as being a potential problem for Tesla is also a pretty valuable asset. Yeah, I think the idea that Elon Musk is this visionary, genius executive still persists for a lot of people. And despite all of the issues Tesla and Elon Musk have had in recent years, there is still a good section of investors who believe that and are pretty dedicated to Tesla's vision, regardless of where Elon takes it. Kerry, thank you very much.

Kerry Paul

Thank you.

And that was Kerry Paul, a technology reporter with Guardian, US West Coast Bureau. Her work on Tesla is@theguardian.com. And that is it for today. This episode was produced by Hannah Moore. Sound design was by Rudy Zagadlo.

The executive producer was Elizabeth Kassen. And we're back tomorrow.

The Guardian

This is the Guardian.