Elon Musk’s focus on Tesla has been under fire this week. Unless you’ve been off the grid — say, lounging beneath a palm tree on a remote sandy beach — you know that Musk and Twitter’s board have been wrestling over control of one of the world’s top social media sites. Musk’s diatribe about free speech rights seems a distraction to many Tesla stockholders, who have seen the Tesla portfolio valuation of late resemble more of a rollercoaster than a preferred slight but steady upward slope.
An article this week in the Guardian explores whether to focus on Twitter or focus more on Tesla. Is Elon Musk overextended? Should Musk’s focus on Tesla and his other established companies (SpaceX, Neuralink, The Boring Company) be exclusive? When Musk turns his attention away from Tesla, is he reducing the potential of the all-electric car company, whose future viability “is by no means guaranteed?” With analysts looking for sales to double to $34 billion by the end of 2023 as new plants in Berlin and Texas produce at full capacity, many still insist that Tesla’s valuation is “exuberant.”
Should Tesla CEO Elon Musk focus on Tesla much more? Let’s engage in a point | counterpoint discussion and see what we can determine.
[Full disclosure: I own some Tesla stock. Nothing in this article is investment advice of any kind.]
How Quickly a Week Changes Everything
Counterpoint: Tesla investors are wary that Musk’s recent laser focus on the Twitter takeover does “pull him too far away from the day job,” according to the Guardian. A week ago, Tesla shares dropped 3%. Yet today, with the 2022 Q1 earnings in, Tesla’s stock value increased 8% overnight. Yes, Tesla comprises one of the most ambitious manufacturing expansions in corporate history with a rapidly growing capacity. The Guardian acknowledged last week that this is “a hugely impressive feat, given that the company essentially had to invent electric vehicle production.”
Tesla just reported first-quarter earnings for 2022 and beat analysts’ expectations on the top and bottom lines. Here are the key numbers.
- Earnings per share: $3.22 vs $2.26 expected
- Revenue: $18.76 billion vs $17.80 billion expected
No detailed guidance on deliveries going forward was offered, but CFO Zachary Kirkhorn and Musk expressed confidence that the company will experience 50% annual growth on a multi-year basis. New plants in Berlin and Texas will add to existing factories in Fremont, California, and Shanghai, China.
Musk’s recent proposal to acquire Twitter was not discussed during yesterday’s earnings call. A follow-up article in the Guardian commended Tesla’s record Q1 2022, albeit couching the affirmation with a side note saying the successes occurred “despite a tumultuous few months for its CEO, Elon Musk.”
Point: During the earning’s call, Musk and Kirkhorn variously spoke to obstacles that needed to be overcome in order to generate the positive Q1 earnings: inflationary pressures, parts and semiconductor chip shortages, ongoing pandemic, and Russia’s devastating invasion of Ukraine. They admonished their audience to be aware that supply chain constraints are likely to continue through 2022 and that inflation is worse than has been reported. Tesla’s solar deployments dropped by nearly half to 48 MW in the first quarter of 2022 versus the same time last year, reportedly caused by import delays beyond the company’s control.
“Recent Covid-19 outbreaks have been weighing on our supply chain and factory operations,” they delineated. “Furthermore, prices of some raw materials have increased multiple-fold in recent months. The inflationary impact on our cost structure has contributed to adjustments in our product pricing.”
What had been an 8-day Tesla global vehicle inventory in Q1 2021 fell to a 3-day supply a year later. The Full Self Driving (FSD) program has hit more “false dawns” than any technology development Musk had previously been involved in, he acknowledged. In January, Musk announced that Tesla would not produce a new vehicle model this year. Instead, it will focus on its existing output and deal with supply chain constraints. Tesla would, however, turn its attention to improving its production and what it sees as a groundbreaking bet on FSD, which aims to perform everyday driving tasks with an attentive driver behind the wheel.
These barriers have a heady influence on Tesla’s overall stability and stock performance.
Counterpoint: Musk has proven he can guide Tesla through manufacturing complications. “A lot of companies get confused,” Musk has pointed out. “They spend money on things that don’t … actually make the product better.” In 2018, he attempted to soothe a customer whose delivery date had been pushed back several times. “Sorry, we’ve gone from production hell to delivery logistics hell, but this problem is far more tractable,” Musk explained in a Tweet. “We’re making rapid progress. Should be solved shortly.”
And, indeed, he and the company did solve the hellish problems on the road to this week’s announcement of continued Tesla accomplishments.
The innovator, leader, genius, visionary, and futurist said in a 2010 interview that entrepreneurs need to be “extremely tenacious and then just work like hell. You just have to put in 80 to 100 hour weeks every week.” He explained, “If other people are putting in 40 hour workweeks and you’re putting in 100 hour workweeks, then even if you’re doing the same thing … you will achieve in 4 months what it takes them a year to achieve.”
In 2018, Musk slept on the floor of the company’s vehicle-assembly plant because he wanted to suffer more than any other employee during the troubled production ramp-up for the Model 3 sedan. This week, Tesla has required Shanghai workers to similarly sleep on a factory floor as it plans to gradually resume production. During the “closed loop” restart, workers have each been given a sleeping bag and a mattress.
Point: Tesla is just one of several companies under Musk’s control, any and all of which require him to devote time and energy that could otherwise be devoted to Tesla.
- With Neuralink, micron-scale threads would be inserted into areas of the brain that control movement. Each thread contains many electrodes and connects them to an implant, the Link. This first neural implant ever could let you control a computer or mobile device anywhere you go.
- SpaceX builds and launches the Falcon 9 and Falcon Heavy rockets, both of which have booster stages that return to Earth for refurbishment and cost savings. The Dragon is a space capsule that can carry crew and cargo to the International Space Station. A large rocket and spacecraft system, Starship, will be able to carry massive payloads to space. A massive constellation of small satellites called Starlink intends to provide global high-speed internet access. Cyber defense and overcoming signal jamming of its Starlink internet satellites amidst Russia’s ongoing invasion of Ukraine has caused company upset.
- The Boring Company creates safe, fast-to-dig, and low-cost transportation, utility, and freight tunnels in order to enable rapid point-to-point transportation.
CEO Elon Musk was already busy juggling leadership roles at these major companies before he launched an unsolicited takeover offer for Twitter. That’s a lot of distractions. And it may be one too many for Tesla investors, according to CNN.
Counterpoint: Unlike most of its peer carmakers, Tesla has spent years focusing on how to secure its own nickel supplies. The efforts are part of chief executive Elon Musk’s focus on vertical integration to maintain control over Tesla’s supply chain. The company jointly operates a large battery-cell plant outside Reno, Nevada, with Panasonic. Tesla buys cells from other leading suppliers as well but also manufacturers its own supply. Nickel is a key component for the cathodes of electric-vehicle batteries, and Tesla is focused on nickel-based chemistries for longer-range vehicles. It uses iron-phosphate batteries for shorter-range vehicles.
Point: Musk seems to have an inability to focus. He dismantled Tesla’s public relations department and, instead, keeps the company in the media spotlight by posting on Twitter. There’s a lot of misunderstanding of Tesla in the press and among the public, but there isn’t a focused PR team to effectively correct those misunderstandings. Adding the falcon-wing doors to the Model X was Elon’s last-minute idea, as TechCrunch notes. He was adamant that the company could build a car factory that was almost entirely automated, and that shift to automation was fraught with initial problems. He also implemented the ability to pay with cryptocurrency, then took the option away, and then reintroduced it for Tesla vehicles and services.
It seems as if Points and Counterpoints here are pretty equal, which leads us to a stalemate. What we probably can agree on, however, is that Elon Musk is a pretty rare bird who can accomplish more in one lifetime than scores of others could together. With that intellect come flaws, of course, and, so, Musk’s need to be self-actualized in as many different iterations as possible will likely always affect the Tesla stock price.
It may be a side effect of tracking human imperfections and brilliance.
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