Should A CEO Of A Publicly Traded Company Vacillate As Much As Musk Does?
In January, Tesla CEO Elon Musk insisted that US tariffs were needed against China. Yet Musk, with a tendency to vacillate on key company positions, told participants at the Viva Technology conference in Paris this week that he opposed US tariffs on Chinese electric vehicles (EVs) because they were part of measures that distort the market.
Once upon a time, Musk had insisted, “If there are no trade barriers established, (China) will pretty much demolish most other car companies in the world.”
It seems that no longer does Musk hold that same position. “Tesla competes quite well in the market in China with no tariffs and no deferential support,” Musk elaborated to the Paris audience this week. “I’m in favor of no tariffs.”
Editor’s note: As others have pointed out, in this particular case, it doesn’t seem like Elon Musk is changing his position at all. He has said at least a few times that Chinese EV companies are producing better and more competitive EVs than Western automakers, and that they could demolish those automakers, but he’s not opposed to that happening and supports not imposing tariffs on them. He appears to have no concern for traditional US and European automakers collapsing in the face of Chinese market pressure, and he sees Tesla as one of the only companies that can compete with these Chinese automakers. [Update added at 10:50am ET on May 27.]
According to local media outlet China Daily, the Chinese Ministry of Commerce described the US move as “typical political manipulation” and asked the US to immediately rectify its wrongdoing. Earlier, the World Trade Organization has already ruled that the tariffs imposed by the US on imports from China are inconsistent with the General Agreement on Tariffs and Trade.
The comments emerged as US President Joe Biden quadrupled US tariffs on EVs and other Chinese imports, to the tune of about $18 billion. In its statement announcing the tariff changes, the White House stated that Chinese exports of EVs grew 70% between 2022 and 2023, running the risk of stifling investment into US EV manufacturing.
Basic management principles outline that, without CEO alignment at the top, disconnect trickles down, and the whole organization suffers. Speed to market, predictability, or delivery efficiency disintegrate due to weak product management disciplines and a lack of customer focus. It’s a tremendous dilemma within the Tesla organization right now, with little promise of substantive change in the near future unless Musk reins in his propensity to vacillate on important company decisions.
The Public vs. Private Company Distinction
A private company is generally owned by its founders, management, and/or a group of private investors.
A public company, on the other hand, has sold a portion of itself to the public, so that shareholders have a claim to be part of the company’s assets and profits. Public disclosure of business and financial activities and performance is required of public companies. This information reaches the public as annual reports, quarterly reports, and current reports (such as 10-K, 10-Q, and 8-K) that are filed with the SEC.
Musk, as CEO of a publicly traded company, wields significant power over the company’s direction and performance. The CEO’s influence on stock performance doesn’t exist in isolation — it’s often amplified or diminished by several factors, such as clear and effective communication, strategic decisions and execution, financial acumen, and personal reputation and credibility.
Tesla shares have been in decline over the last year as it struggles to spur EV demand and manage pricing. Musk’s inability to lead the company robustly and consistently has damaged its overall valuation. Financial experts variously say Musk hurts demand through his actions or that being a visionary isn’t enough to stabilize the company — his polarizing statements and provocation are now crash testing the axiom that there is no such thing as bad publicity.
Musk isn’t reflective — reflection is about the specific act of inspecting work in the past to plan for the future. Instead, he will constantly vacillate, or have an inability to reach and hold onto a firm decision. He goes with the flow with spontaneous reactions to stimuli. This tendency to vacillate is a hindrance to the overall potential of Tesla, so digital innovation work from IT and engineering teams is wasted due to his shifting priorities at the C-level.
A recent reader comment under a CleanTechnica article blossomed into its own article because it provided a superb list of what the CEO of Tesla should be doing. So many of the items on the list were excellent, but I particularly liked “start a marketing company that understands branding and narrative” and “reconfirm Tesla in the mind of the public as a barrier breaking company moving the world to sustainable energy.” Continuity in these areas would be instrumental toward establishing future Tesla stability.
To Vacillate or Not to Vacillate? A CEO can Decide
Musk alters his positions on many policies midstream. Here are some of the many examples.
Supercharger network in jeopardy: With 50,000+ Superchargers, Tesla owns and operates the largest global, fast charging network in the world. It makes the company one of the larger US customers for utilities, and, in support of the Supercharger success, the feds have provided Tesla $5 billion in funding for new chargers.
Then again, Musk fired the Supercharger division last month. The division that provided constant praise and competitive advantage is now in flux.
Referral program: Valued or not? After our long conversation about the benefits of buying a Tesla, my friend decided to take the plunge. I offered to send her my referral number, but — wait for it — the Refer and Earn program ended on April 30, 2024.
I was under the impression that, without a marketing team, Tesla was counting on people like me to spread the Gospel according to Tesla. Nope.
Low-priced/next-gen vehicle — yes or no? In his remarks during the earnings call on January 24, Elon Musk confirmed that Tesla expects to start production of the new model in the second half of 2025 at its factory in Austin, Texas. It would be built in a new factory in Mexico and then another new factory outside North America. For many years, Tesla’s lofty stock valuation has been pumped up by people’s expectations about Musk. He announced that he would bring a low-priced/ next-generation Tesla to market soon and was greeted with mass enthusiasm. It was reportedly being developed under the code name Project Redwood as a compact crossover.
But Tesla reportedly dropped a big internal project to develop the long-promised inexpensive car that investors had been counting on to drive growth.
Sustainability: good or bad? Once upon a time, when Musk wrote “Master Plan, Part Deux,” he reiterated the company’s mission remains all about “accelerating the advent of sustainable energy, so that we can imagine far into the future and life is still good.”
Now Musk claims that environmentalists want communism.
Freedom protected? Musk added in Paris that he is against “things that inhibit freedom of exchange.” Hmm. Freedom of exchange, eh?
Two years ago, when a handful of dissatisfied SpaceX employees wrote an open letter to Musk begging him to stop making comments in public that brought the company into disrepute, they were fired.
To run a company in China is to vacillate: “We will make ventilators if there’s a shortage,” Elon Musk said on Twitter at the beginning of the Covid-19 pandemic. He made good on his promise to help get more medical ventilators to hospitals in California to treat patients, publicly thanking Tesla staff and customs officials in China and Los Angeles for their assistance.
Perhaps this is one key to Musk’s inability to stick to one position — market influences, such as those in powerful and Tesla profit-making China, force his hand. Yet in the recent US tariff increases, Biden vowed to not let China “unfairly control the market” for EVs and other key goods, including batteries, computer chips, and basic medical supplies.
Has getting his hand slapped by Chinese authorities, a sign that China is controlling a good portion of the Tesla market, caused Musk to vacillate again?
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