Elon Musk sounded depressed on the latest earnings call. Aside from his freshly bruised ego and his dented net worth, his former customers have turned hard against the Tesla brand, and he knows his army of fans is unlikely to compensate for that sales loss in time for the next quarterly report.
Company loses $, numbers go up
Musk’s announcement of leaving DOGE or scaling back his involvement was expected, but so palpable was the relief of markets that Tesla’s stock price shot up 18%, which was the most surprising result of the call. It actually lifted Tesla’s market cap by $158 billion.
In the call, Musk touted Optimus and Tesla’s battery storage business as future drivers of revenue, but Optimus is not on the market yet, and Musk has a history of overpromising future products.
Never mind that Tesla hasn’t launched a remarkable product since 2019. The stock is beloved by speculators due to its volatility and Musk’s star power.
In that respect, Musk’s impact on the markets is rather magical, but it also suggests the thirst of investors for good news and their subsequent irrational euphoria when they get a whiff of it. Yet, there are obvious cracks in Musk’s cult-of-personality.
In the past 10 days, many Tesla investors have poo-pooed Musk, telling him both to get back to work and to resign. Short of a board mutiny, that seems highly unlikely. Or is it?
The Search for a New CEO
A week after Musk announced his plan to return to the helm at Tesla, a report in the Wall Street Journal on April 30th revealed discord at the company. Last month, according to insiders, the Tesla board connected with several search firms to begin the process of finding the carmaker’s next CEO. How far this process has gone or if it is still ongoing is not public knowledge.
It’s possible that the board’s move to find a new CEO prompted Musk’s announcement to return his focus to Tesla. Whether that was the board’s intention or if they truly planned to dump Musk remains to be seen.
On May 1, the Chair of the Board, Robyn Denholm, denied the reports. Meanwhile, a few board members, several of whom are friends and relatives of Musk, have reportedly been selling their stock. Denholm alone has sold $558 million since 2020, much of that in the last six months, while the stock was on a 41% downward slide.
By the Numbers
Tesla’s net income dropped a staggering 71% in the first quarter. Sales in Europe dropped 36% last month compared to last year, whereas EV sales in general were up 17%. It seems unlikely these numbers will rebound in the second quarter.
Meanwhile, Chinese electric carmakers such as BYD and Nio are flooding into Europe. Given the contentious nature of trade relations between the European Union and the United States, Chinese carmakers could stand to benefit while Tesla suffers.
Tesla’s stock price could also start to feel more downward pressure. Sure, there’s been plenty of hysteria over its recent plunge, but Tesla’s share price is still higher than in early November.
However, the company trades at a price-to-earnings ratio of 155. For comparison, Ford and Toyota both trade at a P/E ratio of 7. No other car company comes close to Tesla’s valuation.
Of course, the constant refrain is that Tesla isn’t a car company. It’s a technology company, technology being a sector in which large P/E ratios are more common.
Cars, Robots, and Batteries
But the vast majority of Tesla’s revenue comes from selling cars. Optimus might be a humanoid robot that can move an egg without breaking it. But, Hyundai Motor Company owns a prominent robotics company, which also makes a humanoid robot, and Hyundai’s P/E ratio is under 3.
The difference is Musk. Up until now, he’s been able to miss deadlines, under-deliver on promises, while effectively selling a bright future to investors that kept the stock going up. The guy built a rocket company from scratch, so there was reason to believe in him.
But that was when revenue consistently rose from quarter to quarter. It was also in the days of COVID when stimulus money was flooding the market. It was also when the Tesla brand appealed to a certain demographic that has since lost enthusiasm for the car and its omnipresent CEO.
Now, we’re in a different era. The U.S. economy shrank .3 % in the first quarter, and consumers and business leaders alike are spooked. Tesla would very well be facing headwinds anyway in such an environment, but now it is also dealing with what some critics say is permanent damage to the brand.
Backlash and Losses in Court
Tesla vehicles have become a political lightning rod on the streets, leading some owners to sell or destroy their cars. Tesla dealerships have become the target of protests and attacks in the U.S. and other countries.
Also, a former employee recently won an appeal against Tesla in Texas federal court. Cristina Balan, a talented Romanian engineer, worked at Tesla until 2014, when she reported concerns about the carpet under the pedals of the Model S. She warned that the carpets could create a safety issue.
In 2019, she sued the company for defamation and nearly lost the case in arbitration, but revived it by recently winning her appeal.
The alleged facts of the case are not a good look for Elon Musk. The plaintiff Balan says Tesla threatened to deport her entire team after she blew the whistle. Although that never happened, Balan says she was forced to resign as a result.
The case is one of many Tesla has faced regarding its practices and the way it treats employees. With the cyber truck recall, the brand has another strike against it on safety.
Beyond that, the political ill will may be the worst for the future prospects of the brand. If it’s not Musk doing Nazi salutes, it’s people driving his vehicles, as was seen in a recent viral video.
Eric Dezenhall, a Crisis Communications expert and founder of Dezenhall Resources, told Yahoo News: “It’s almost impossible to be a politically divisive figure while running a consumer brand. X/Twitter is one thing: You could make the argument that its purpose is political, and if you can build a consumer base on that, fine. Tesla is something different. It’s a consumer product that was marketed as an alternative to fossil fuel-burning cars. This was appealing to progressives and even some conservatives. It’s lost its status as a progressive “badge” product.“
More people doing that while driving Teslas will do little to improve the company’s brand image problem. However, given that Musk did his best to popularize the notorious salute at Trump’s inauguration, Elon’s fanboys can be depended on to imitate their hero, driving the wedge deeper between Tesla and its most likely customers.
Should I Stay or Should I Go?
There’s speculation that Musk actually wants to make his exit from Tesla. Since a Delaware judge denied his $56 billion pay package, he has claimed to have gone unpaid since 2018. While this might seem cute coming from the richest private citizen in the world, it could be a contributing factor.
Additionally, Musk also runs five other companies that require his attention. Given his obsession with launching a manned flight to Mars, his focus could actually be on SpaceX and the many ongoing government contracts.
If Musk chooses to stay, he will be fighting an uphill battle to win new car customers, successfully introduce self-driving cars, and grow revenue. Given the huge pulpit from which he posts on X and the frequency with which he does so, he is unlikely to become a restrained presence.
Certainly, he will maintain a sizable amount of hardcore support from his online fanbase, but if Tesla suffers several quarters in a row of declining revenue, it might not be enough to save the stock from a steep decline. That said, the company reported holding $37 billion in cash at the end of 2024, so it’s hardly in danger of becoming insolvent.
In addition, Tesla’s energy storage business is growing rapidly, reaching just over $10 billion in revenue in 2024. Whether that is enough to compensate for dwindling car sales is unclear.
In regards to the Tesla stock, short-term volatility could be profitable for extremely online investors with a nose for price movement. In the long term, Tesla,could prove to be a challenging investment. However, animal spirits in the market being what they are, who’s to say for sure.
What seems clear is that Tesla as a brand could benefit from fresh leadership with less baggage. However, so much of the company’s current valuation is based on Musk’s unwavering belief in its future as a leader in AI and robotics, not to mention the marketing mystique of Musk. Nobody can generate irrational euphoria like Musk, and Tesla has never needed to depend on fundamentals, instead relying on government handouts, speculation, and star power.
Although sales will likely continue to stagnate and Musk will continue to insult people on his platform and cause Tesla owners embarrassment and shame, there are wild cards that could propel the stock upward. Imagine if President Trump issued an executive order that all American police officers must drive Teslas. That is not out of the realm of possibility, and it’s exactly the kind of deal that Musk could obtain thanks to his enormous campaign donations in 2024.
If you’re a Warren Buffett-type investor, you settle into a nice index fund. If you’re a speculator and crypto trader who likes gambling, odds are you’re bullish on Tesla. And you might be right!
Author: Laird Dilorenzo
#ElonMusk #Whistleblower #DOGE #Tesla
Laird Dilorenzo is a hatchet thrower and wordsmith.
The editorial team at #DisruptionBanking has taken all precautions to ensure that no persons or organizations have been adversely affected or offered any sort of financial advice in this article. This article is most definitely not financial advice.
See Also:
How Elon Musk’s Tesla Bonuses are Fuelling a Delaware Exodus in 2025 | Disruption Banking
Elon Musk crushes Tesla’s union using his control over Twitter | Disruption Banking
