American Consequences - February 2019

Much like that first car he made, Musk is a total mess imperfectly concealed within a rockstar(ish) exterior. In 2018, public outbursts of irrational exuberance – including a feud with the U.S. Securities and Exchange Commission and another with the man who saved the Thai kids from that flooded cave last summer – have permanently altered the company’s public image… as have accounts of the dreaded demands Musk makes of his employees behind the scenes: layoffs, debt, and repeated production delays. The middle-range Tesla Model 3 Musk promised three years ago, an everyman’s sedan, would cost $35,000. It was intended to lure a mass audience away from conventional cars – thereby, saving the world. And yet, despite amassing nearly 400,000 preorders, the Model 3 may never make it to scale at the promised price: Fewer than half the pre-orders have been manufactured so far. Indeed, Tesla may never be able to afford to sell a Model 3 for $35,000 – it’s now closer to $50,000 – leaving room for long-term competition from Audi’s and BMW’s luxury electric vehicles on one end, and eventually Ford’s on the other. Plus, demand isn’t what it used to be: Model 3 sales were down late last year. Its profits, some say, may have already peaked. “Tesla underestimated the cost curves and manufacturing side of the equation,” analyst Joseph Spak with the Royal Bank of Canada told clients in a late January letter, explaining Musk’s unrealistic projections for the $35,000 Model 3 – which, close to three years later, “still does not exist,” Spak wrote. Analyst Adam Jonas of Morgan Stanley, the leading Tesla whisperer on Wall Street, wrote in

a recent analysis that Tesla’s market dominance could be approaching a peak: After this year, key competitors could begin to gain on the company, and not a moment too soon. Jonas witnessed the enigmatic founder’s oncoming crisis on an earnings call last spring. Musk deflected questions about production delays and the company’s mounting debt – which is currently hurtling toward $1 billion, about a third of its cash on hand. He called analysts’ questions “dry” and “boring.” Instead, Musk talked for 20 minutes to a fan who’d piped in via YouTube. It was, Jonas said, “the most unusual call” of his career. ‘$100,000 BATTERY CARS THAT CATCH ON FIRE’ And by way of an explanation, “Elon Musk is a total crazy pants,” said one former employee, who used to manage communications for the company and requested anonymity to speak candidly about his time at Tesla. The pace and procedure of Tesla’s manufacturing plans were a problem long before market analysts and the media caught on, this ex-employee explained. “There’s a striking amount of ends-justify- the-means people at Tesla. They really believed that they were going to save the world somehow, with their $100,000 battery cars that catch on fire.” At one point, he was asked to redirect blame for the Tesla Model S’s repeated, and virtually inextinguishable, battery fires away from the cars themselves – and heap scrutiny on the firefighters who’d rush to the scene of a flaming Tesla.


February 2019

Made with FlippingBook Learn more on our blog