I Hate To Admit It, But Tesla Still Needs Elon Musk

Elon Musk is scattered. One part of his empire handles the majority of  U.S. space-fairing operations and shapes the battlefield in Ukraine. Another has gone from the platform that turned The Discourse to a sizzling pot of white nationalism and existential dread (e. A smaller province works on implanting computers into human brains, now that it’s tired of killing monkeys. But the lynchpin of it all is Tesla, the most valuable auto company in the world. And despite his wandering focus, his ongoing descent into a community of racists, and his attempt to squeeze more shares out of the company, Elon Musk is still the person Tesla needs.

Even a Tesla bear can see it. Craig Irwin is an analyst at Roth MKM who has long argued that Tesla is overvalued. His latest comments suggest the company could be worth just $85 a share, less than half of its current trading price ($191 a share at the time of publication). He calls the current state of Autopilot “cake dressing” that will not materialize into full autonomy. Point is, he’s not the type to quickly buy what Musk’s selling. Yet he can’t deny that Musk is the secret sauce. If the CEO asks for twice as much voting power at Tesla, Irwin says the company ought to give it to him. 

“My view as probably one of the loudest and most visible bears on the stock: Pay the guy. Give him warrants,” Irwin said, referring to a stock option that gives holders the right to buy at a specific price. “Give them warrants, and let the warrants vest based on milestones.” (Note that Irwin said this before a judge ruled against Elon’s last giant pay package.)

Because Musk could focus his efforts in the artificial intelligence space on Tesla. But he could also fund them through SpaceX, or NeuraLink, or start another company. For investors, though, Irwin says Tesla is the best vehicle. There’s a team in place, funding mechanisms, and a culture of innovation. It’s a name people know and, at least to some extent, trust. And leadership in that space is possible. But to pull it off the company needs Musk.

“I have a huge admiration for him, even though I’m a well-recognized bear. God forbid there’s a catastrophic accident [involving Musk], I would expect a very large correction to the stock, as much as 30 or 50%” Irwin told InsideEVs. “He’s the one with the vision, he’s the one with the drive. 

“Talk to former executives, and they’ll say he’s an asshole,” Irwin added. “That he won’t take no for an answer. That he’ll get you to test every single assumption you already made, and very often those things taken as religion from other industries are just dead wrong… they’re fabricated. There’s no basis for this ancient religion. He really pushes people beyond the boundaries of what they see themselves as capable of achieving, and that is a sign of a tremendous CEO.”

That approach has costs. While automotive executives like General Motors CEO Mary Barra answer to a board, and union leaders, and long-standing supplier contracts, and political concerns, most of Tesla answers to Musk—including much of that board, critics have said. It’s why a judge ruled that no one really negotiated against Musk in the last round of compensation talks. It allows the company to move incredibly fast, but a culture of never saying no can lead organizations to double down on their own mistakes, or pursue novel solutions to problems that don’t exist. Think removing turn signal stalks, or radar, or using AI to detect rain when a $1 sensor would work better. Move fast and break things can work great for a startup, but can be dangerous for an established player. 

That’s why some auto experts see value in Tesla without Musk. Not as an AI company, or a tech company, but as a car company. The brand already makes the best-selling SUV in the world. But its innovation-above-all culture can lead to massively investing in projects that are flawed from the beginning. It also pushes “boring” but important work to the backburner, like redesigning existing products. As the company matures and faces stronger competition, that stuff becomes more important. 

“I think that he really was an asset to grow Tesla in the early days,” Jessica Caldwell, head of insights at automotive sales firm Edmunds, told InsideEVs. “However, [Tesla] has evolved and matured. The company in the next 10 years is going to be a lot different as it deals with regular automotive industry issues. On his [Q3 2023] earnings call, he talked about interest rates like, 50% of that call. He was down on it, talking about how hard it is to operate in an environment with high interest rates. That, to me, feels very much like a regular auto company problem.

“I think as Tesla matures a bit more it’s going to have to go the route of an auto company, especially as the EV market moves from early adopters to mass market consumers,” Caldwell added. “Those people are not going to be as forgiving if their Tesla dies on the side of the road, they’re going to be bad. People so far have largely given Tesla a lot of passes for some of the issues the vehicles have had.”

That last part rings true to my ear. When Tesla was decades ahead of Detroit, it was easy to excuse early-adopter foibles with things like door handles, bumpers falling off, cars getting bricked, and the like. These days, the company is still ahead of its competitors in key places like batteries and software, but no longer trotting ahead uncontested. The Cybertruck isn’t the first EV pickup to market. It’s the fifth. Yet the company still seems to rely on its consumers for bug testing and feature validation, meaning anything that can’t be fixed with a software update will require expensive replacements and redesigns. 

As the company gains experience, its quality and product validation process will surely improve. The question is whether it’ll be able to do so while maintaining its edge on competitors. In Caldwell’s view, one limit to that is Elon’s own attention. GM CEO Mary Barra has lived that business her whole life, does it as her only job, and is focused on execution above all else. Elon, Caldwell notes, has to spend time on reinventing X, on planning for Mars, on brain implants and everything else. He may be smarter or harder-working than other executives, but he still has just 24 hours per day to allot. As Tesla moves into a more mature phase, Caldwell argues it needs focus and execution.

It’s a compelling argument if you see Tesla as a car company. In 2024, that’s what the company is. Musk likes to say it isn’t in the same way that he claims to not be corporate, despite running the largest automaker by market cap. But notice how Irwin’s argument for keeping Musk had little to do with dominating the car business.

That’s for a very simple reason: To Irwin, and the investors that ultimately have power over Tesla, the product of the company isn’t its cars. It’s the company’s stock. Tesla’s best future for that industry isn’t hinged on the boring parts of running a cash-flow-positive car business. There’s no shareholder value in that. For proof look at the stock trajectory of Ford, or GM, or Toyota, or any other giant over the last decade. Flat, or declining, or barely up. Their business is too cyclical, with too much overhead and facing too many headwinds to survive long-term. But by aggressively positioning Tesla as a tech company with an eye to the future—specifically, full autonomous driving—Musk is driving considerably more shareholder value.

That’s because stocks aren’t about cash flow. They’re about growth. Amazon didn’t become one of the most valuable companies by making the most money; for most of its ascent, it was losing millions. A stock is a bet on a company doing better in the future. For legacy automakers, that’s a tough sell. Even if GM, or Ford, or Toyota can nail the transition to EVs, do they have any hope of doubling their current market share? 

“When it comes to legacy car companies, everyone is talking about stranded assets and slothful design cycles; distribution challenges with the dealership base, and the fight with organized labor. I mean, these are constant points of conversation,” Irwin said. “They aren’t known for doing a good job on technology or cross-integrating systems across the vehicle. They buy things off the shelf from all these different vendors, and the vendors don’t have any interest in selling each other’s products, they want to maximize for themselves.

“It’s massive conflict left and right, the white-collar workforce versus the blue-collar workforce, the pre-existing install base, the political interference. It’s a massive clusterf**k.”

It’s the natural result of a mature market. A bureaucratic mess where everyone gets their piece. It’s why the automakers had to be spurred into action by Tesla: There was a massive growth opportunity, but too much inertia and old thinking in the system for anyone to really try a ground-up result.  

This is where Musk earned a reputation for being a genius. He takes problems that most people are too scared of, that look too ill-defined or risky, and pushes people to the bring in order to exploit the opportunity when the potential is highest. He didn’t just start a space business, he showed the world that space could be a business. He isn’t starting a biotech company. He’s convincing investors and participants and the media that brain implants are a viable business if you push through the hard part. That “move fast and break things” Silicon Valley ethos can be dangerous if left unregulated, but it’s also why Musk was able to see an opportunity for exponential growth in the auto sector when Detroit was focused on 5 percent gains.

But that early part of the EV revolution is where all the growth is. In the long term, the electric car market will likely face the same pressures as the old car market. Heavy capital requirements, long product cycles, a supplier base to distribute risk and investment. Tesla can remain outside of that, and even succeed as a car company, but the exponential growth Wall Street wants will be tough. Tesla still makes over half of all EVs sold in the U.S., but that number continues to fall. The auto market is just too segmented for that domination to be sustainable: Some people want sports cars, others want heavy-duty trucks, and others, microcars. Staying ahead of everyone, in every segment, always, is just too tall of an order.

If the goal was to maximize Tesla’s long-term share of the automotive pie, I’d agree with Caldwell. Bring in someone who can keep everything fresh while still pushing engineers to maintain Tesla’s lead in battery and motor tech. But that isn’t the goal. The goal is growth. If you want that, the auto market is a bad place to be. The exponential growth opportunity is in the AI space. Like him or not, if you want a CEO to charge into an area as messy and ill-defined as that, there’s no better option than Elon Musk.